Sunday, January 17, 2010

The Spanish Economy Works Underground

The Spanish employment minister, Celestino Corbacho, did something last week that very few Spanish politicians have ever seemed willing to do; he issued an estimate on the size of the hidden economy in Spain. Now of course Corbacho is a politician and his estimate, at 16-20% of the gross national product (GNP), is probably a little out of date.

It might have been more or less accurate a few years ago but the construction boom and the economic crisis mean that the real figure is larger. In the case of construction because so much activity in that sector has been invisible to the tax inspectors. In the case of the crisis because of the number of self-employed autonomos who have stopped paying social security contributions, and also because of other indicators; such as the low take up of the payments to those who had exhausted their unemployment benefit. So the real figure is almost certainly higher than Corbacho's estimate and the plumber who once gave a customer a genuine receipt has since been forced into unhappy exile.

Even so, old habits die hard and the finance ministry soon came out with a statement disowning Corbacho's estimate and the minister was forced to make a retraction of sorts. This reticence when it comes to recognising the reality may be down to different factors. In the days when EU subsidies were being dispensed using official figures on the GNP, it worked to Spain's advantage to have a lower figure than the real situation. Also, if you don't talk abut the subject then you avoid any uncomfortable questions concerning the number of €500 notes circulating in the country or comparisons with other countries. All of which leaves commentators questioning why Corbacho chose to raise the subject at all?


Troy said...

Perhaps one of the first Spanish phrases expats should learn is how to respond to the question. ¿Quieres un recibo??

Graeme said...

Let's face it - what are you going to do with the receipt anyway? It's just more paper to recycle.