“Spain is set to usurp Germany as the strongman of Europe, due to the increasing competitiveness of its exports, say Morgan Stanley analysts, who think fiscal rebalancing will continue in the country despite its current political turmoil.
“Spain, where unit labor costs are falling due to recession and reforms, and where exports performance is strong, is on its way to become the euro area’s next Germany,” wrote analysts Joachim Fels and Sung Woen Kang in a weekly note on the global economy.
“Germany, helped by super-low interest rates, rising wages and inflating property prices, will see domestic demand improving and its external competitiveness deteriorating.”
Fels told CNBC.com it would take three-to-five years for Spain to rival Germany as an export-led economy, due to the time lag before fiscal and structural reforms are felt.
He said that labor costs will remain low in Spain even when it recovers from recession, as “unemployment will still be high for years to come.”
But Moorad Choudhry, a professor at Brunel University, disputed Fels’s view that high unemployment benefited Spain’s economy….”
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