Economy by Barandiaran

Moving On

by Joseba Barandiaran

Basque economic growth is still relatively high, around 0.7 q/q in the last quarters, while the unemployment rate just fell to 10.1% in the Autonomous Community of the Basque Country (ACBR), where two thirds of Basques live. Good news.

As Nobel Prize Professor Joseph Stiglitz put it in his visit to Donostia-San Sebastian and Iruñea-Pamplona last May, the Basque Country is somewhere in the middle between the countries that guarantee basic rights to its population while maintaining social cohesion (like the Scandinavian ones do), and the US, where social differences have been growing and the middle class has not improved its situation much since the 1960s. In a global context of growing inequality, countries with higher taxes do this better than the rest, although this does not mean that just rising taxes is enough to become an advanced country; especially in terms of social cohesion and welfare, not just growth. It was something to see the political leaders who just lowered taxes in Gipuzkoa hearing all this and asking questions to Professor Stiglitz, at the end of his conference and this video.

Plenty of news regarding the Basque Government’s economic strategy. It is putting in place a strategy to build funds, designating some 250 million euros for it, a sovereign fund and a venture capital fund that will be privately run and (partially) financed. The goal is to keep Basque companies firmly rooted in the territory when they internationalize. They sold a 500 million green bond in June that got the same rating (A+) as the Spanish sovereign bond. It is also offering fiscal incentives for local investment to local individuals (in Bizkaia and Araba, at least) and, at the same time, it is dealing with the Spanish government to finalize the construction of a high-speed train network that will connect most Basque capitals to Madrid and, eventually, Paris. The European Court of Auditors has included this infrastructure´s analysis in its last report, that summarizes from the very beginning: “an ineffective patchwork of lines without a realistic long term plan.” The question is whether those railroads will have 9 million travelers per year or not (given there are 3 million people who live in the Basque Country and 6 million in Madrid).

In the corporate sector, the best news has come from the mobility and electricity sectors: rail solutions company CAF just bought Polish bus manufacturer Solaris, to strengthen its electric coaches section, which is basically what world class Irizar is also trying to do in its new factory in Aduna (Gipuzkoa). Car components and subassemblies maker CIE Automotive has made it to the Spanish stock market Ibex-35 index, joining Viscofan, BBVA, Iberdrola and Siemens-Gamesa. Also Mercedes is heading to record production in Vitoria-Gasteiz and Volkswagen in Iruñea-Pamplona is heading for a second model after the Polo. But it is not only mobility and electricity for Basque companies. The machine tool sector is also prgressing. An example of this is Ibarmia Group´s new factory in China. Trump and the commercial tariffs war are a new red light in the way for Basque exporting companies, while we seem to be lost in the fog of Brexit.

During what began as a rainy summer, tourism and festivals are also an important part of the Basque economy. While San Fermin in Iruñea-Pamplona went fine, Baiona-Bayonne became the first case of fiestas with an entrance fee in Euskal Herria: Bayonne Festival. Security reasons and its associated cost have pushed Mayor Jean Rene Etxegarai to fix a fee for this participative event. The final outcome of it all may pave the way to a new form of partying as we move on. Enjoy the (still free) summer events!

About the Author

Joseba Barandiaran
Joseba Barandiaran is an economist @barandiaranj | Mail | LinkedIn

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