The Gain in Spain
By A. Michael Spence
Spain appears to be in the early stages of restoring a balanced and sustainable growth pattern. One hopes that others will soon follow its example.
To skeptics, green shoots of recovery will not bloom without access to the credit spigot, which is still clogged by balance-sheet damage in many banks. But, though the road back to full employment and sustainable growth will not be built overnight, progress on it may be faster than most observers expect.
It is easy to get lost in the details of recovery patterns, so a sound framework for assessing potential growth helps. In fact, the Spanish economy is a classic case of a defective growth pattern followed by a predictable, policy-assisted recovery that is driven (with a delay) mostly by the tradable sector.
Read the full article as published in Project Syndicate.
A. Michael Spence is the William R. Berkley Professor in Economics & Business.