Sovereign debt bubble thread

[Iormlund]

It should be somewhere around the point where unit labor costs are equal.

Not really. Far more goes into deciding where to invest.  Spain is well positioned in some indicators (as most developed countries) but quite badly on others, and it's not going to improve:

• Logistics suffer if your components are made far away, so there's a great deal of inertia involved and that doesn't help when you want to to build new industries.
  
• Surprisingly if you just look at the number of unemployed, there are not that many skilled workers available, the crisis mostly hitting people with no useful education or experience (and preventing them from getting any). Austerity will affect further education as well.
  
• Financing is frozen due to toxic real state assets and capital flight.
  
• You have to compete against established firms in a contracting domestic market. Savings rates are ridiculously high as a result of uncertainty, unemployment and massive private debt, and will be so for one or two decades. Further wage depression can only exacerbate this. And to top it off, our closest markets are in a similar situation.
  
• Any future appreciation of the € would eat into unit labor costs.
  

Truth is we don't have the capital, neither human or otherwise, to compete with Germany or Sweden. And we lack low salaries as well. We used to have a big ass market, but those days are over.
So even Spanish multinationals like Teka have been closing plants here and moving them to, in this particular case, Turkey. This despite having to pay quite a bit in severance payments.

[alfred russel]

It cracks me up that non-Depression inducing reduction in wages is not even considered an option.

Heh. How can a nation-wide 20/30% reduction in wages NOT result in depression?

Hell, a nationwide 20/30% reduction in wages sounds like a depression.

[Zanza]

The problem is we don't even know where that equilibrium is, if it exists at all.

It should be somewhere around the point where unit labor costs are equal.

When the country you need to compete with has flat or sinking unit labor costs itself, that's almost impossible to do.

[Zanza]

Truth is we don't have the capital, neither human or otherwise, to compete with Germany or Sweden.

Actually, German companies are constantly complaning about a lack of well-trained employees, yet wages are almost flat as they offshore what they can't get at home.
And German companies don't really invest in Germany anymore, most of it is abroad. That's why we had and still have economic problems with domestic demand.

[alfred russel]

The Eastern European economies mostly have fairly healthy levels of public debt. The Western European economies are all very heavily indebted and a crisis of confidence would doom every single of them, including e.g. Germany, France or Britain.

Basically most governments borrow as much as they can get away with. People have confidence in Western Europe, so they can borrow a lot. Eastern Europe is a bit more sketchy, so they have less debt as a percent of GDP. Truly sketchy countries like those in Africa tend to have very little debt, because while lenders may be stupid enough to give a illegal migrant farmworker a million dollar mortgage in California, come on, they aren't brain dead.

[Iormlund]

Actually, German companies are constantly complaning about a lack of well-trained employees ...

They do that here too, then offer €1000/month to junior engineers when housing costs over half that already.

[MadImmortalMan]

Okay, so this is a credit event officially. Markets shuddered for a minute or two. Only about 3B in triggers though. It's a drop in the bucket if true. Of course, everyone's had three years to get rid of their exposure, so no surprise.



The question now is, will Portugal, Spain and Italy want this deal too?

[Zanza]

Wasn't the total private sector loss something like 107 billion? Another 3 billion don't seem to matter with numbers like that.

[Zanza]

Actually, German companies are constantly complaning about a lack of well-trained employees ...

They do that here too, then offer €1000/month to junior engineers when housing costs over half that already.

Only the worst paid junior engineers here will make less 3000€/month. Average entry level salary is probably around 3500€/month. They should really offer German classes in your engineering schools. 

[Tamas]

Actually, German companies are constantly complaning about a lack of well-trained employees ...

They do that here too, then offer €1000/month to junior engineers when housing costs over half that already.

Only the worst paid junior engineers here will make less 3000€/month. Average entry level salary is probably around 3500€/month. They should really offer German classes in your engineering schools. 

it's okay, we will steal those jobs too!

[The Larch]

Actually, German companies are constantly complaning about a lack of well-trained employees ...

They do that here too, then offer €1000/month to junior engineers when housing costs over half that already.

Only the worst paid junior engineers here will make less 3000€/month. Average entry level salary is probably around 3500€/month. They should really offer German classes in your engineering schools. 

That's what my brother did, and now he's in Vienna building trams. Half of his German class were engineering students.

[Zanza]

Is he happy with his choice? I can imagine worse places to live than Vienna.

[Zanza]

it's okay, we will steal those jobs too!

As far as I can tell, that's unlikely as our companies like to keep their core skills and the jobs with the highest value-add at home. So engineering jobs should be relatively safe. The competition is rather with manual labor jobs.

[The Larch]

Is he happy with his choice? I can imagine worse places to live than Vienna.

Oh, absolutely. He already studied there the last year of uni with an Erasmus, and has been back there working for almost a couple of years, and was in Bavaria before that, in Augsburg.

[Iormlund]

Actually, German companies are constantly complaning about a lack of well-trained employees ...

They do that here too, then offer €1000/month to junior engineers when housing costs over half that already.

Only the worst paid junior engineers here will make less 3000€/month. Average entry level salary is probably around 3500€/month. They should really offer German classes in your engineering schools. 

My uni offers German classes, but they are not required to graduate. Anyway, quite a few engineers do end up there. Though the people I know have mostly gone to The Netherlands where AFAIK taxes are significantly lower at least for a few years and it's easy to get by just with English.
My brother's initial plan with his Turkish gf was to work in Germany while she took a Masters there (she is curiously enough an electronics engineer and her siblings already live there).

I might have taken that path some time ago if not for my personal circumstances. While I haven't spoken German in over 15 years I doubt I'd have much trouble picking it up if the need arises.