I wrote at the time, "Stunning Ineptitude Will Make History Books".
Spain's unemployment rate is over 25% and the youth unemployment rate is near 53% yet the fools in the Spanish government hiked taxes yet again, this time by the largest amount in history.
Spain's handling of this economic implosion is sure to make the history books as a prime example of complete ignorance in how to deal with a fiscal crisis.
History in the Making
That prediction took a single month to pan out. Reuters reports Spain retail sales decimated by VAT hike.
Spanish retail sales fell at their fastest pace on record in September as already battered consumer confidence took another hit from a hike in value added tax, driving many shoppers to trade down to cheaper products.All Pain, No Gain
Sales fell 10.9 percent year on year, Monday's National Statistics Institute data showed, reflecting an economy struggling through its second recession in three years and plagued by chronically high unemployment.
The drop was the biggest in calendar-adjusted terms since current records began in January 2004, and marked the 27th monthly decline in a row.
"It's clear there are no signs the crisis is abating," economist at Nomura Silvio Peruzzo said. "The headline (retail) figures show a sharp drop and indicate that domestic demand is not going to be anywhere near what the government is anticipating."
The last thing Spain needs is ridiculous tax hikes. Clearly they are counterproductive. So why do the jackasses keep hiking taxes?
That's a good question, and here is the two-part answer.
- Counterpart jackasses in Brussels insist upon it
- The government in Spain refuses to change work rules and shrink government, something that desperately needs to be done
To be sure more pain is coming to Spain. Shrinking government and reducing pensions would be painful as well, but at least there would be long-term benefit. Hiking taxes is all pain and no gain.
Spain really needs to exit the euro, and it will, but not before the entire country is in the gutter and the masses have finally had enough.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
