In the midst of the euro crisis I would like to share a contrarian view. As opposed to most I am actually optimistic on the euro, and while aware that the euro project may actually implode, I think the opposite will happen and the euro will come out strengthened as a result. Now what I am less optimistic about is how long it will take Southern European countries to reinvent themselves, and in this article I will focus particularly on Spain but many of my arguments apply to Italy, Portugal and Greece as well.

In the case of the Euro I believe there are two possibilities. The first is the abyss, a return to the old times with a fragmented Europe where each country has its own currency. The second, more optimistic scenario, is a new Europe that is more united and better organized, with clear rules. I believe the second scenario is more likely simply because these past days the yield on German 10-year bonds was higher than that of the UK for the first time since 2009. This was a wake-up call for the German government, which is finally realizing that the country is not immune to the crisis and that the market is no longer unconditionally willing to purchase their bonds. This is not happening because Germany is a bad debtor, but because German debt is issued in Euros, a currency with an uncertain future. And as soon as German politicians start paying more to finance their country’s debt and are forced to provide less social services, they will change their current course and help shore up the Euro. At the same time, and I see this as something positive, the Germans will insist that the new Europe become more German, with rigorous controls in place. They will also create a real European Central Bank, a lender of last resort that will  provide liquidity as the Federal Reserve did in the USA, but within a system of rules that will control the level of public and private debt within the EU.

So while aware of the perils I am positive that we will not see the Euro collapse, and that Spain and Italy will again be paying around 3% for their debt in a matter of six months. This is why I believe that buying Spanish and Italian bonds at 7% may very well turn out to be a good investment. I also think it’s absurd that nowadays people would rather deposit money in banks and earn much less interest than what the government of Italy and Spain are paying to finance themselves. Especially considering that these governments are the ones that take on failing banks.

Once the financial problems of Europe are solved, Spain and Italy will have to deal with a much more complicated issue, namely their lack of competitiveness. In the case of Spain the challenge is the highest unemployment rate of the OECD now at 21% and on its way to 23%. And the main reason for this unemployment rate is how un-competitive most Spanish employees, politicians and businesspeople are, compared to those of other countries. Spain, while leading in a few industries related to construction and infrastructure, is mostly a laggard in every other sector. As the current rankings by the World Bank show, Spain and Italy are not very competitive in terms of the overall ease of doing business (Spain is 44th, Italy 87th). And it gets even worse when looking at the ease of starting a business, in which Spain occupies the 133rd spot on the list and Italy the 77th. As comparison, the UK is 7th and 19th in the two respective rankings.

I spend a third of the year in Spain, and the other two thirds in the rest of Europe, the USA Latin America and Asia. Building a global business allows me to realize that there are problems pertaining to Spain that are intrinsically Spanish. At the same time, there are a number of Spanish virtues that are intrinsically Spanish and will help the country get out of the crisis. For example, Spanish people are less likely to believe in utopias and know how to tighten their belt during tough times. They are also more realistic as voters and citizens. Zapatero was bad, Rajoy is mediocre, but at least Spain does not elect a crook like Berlusconi as president.

However, one of the biggest flaws of the Spanish culture is its difficulty to produce excellence, and excellence is the only thing that will lead to recovery of Southern Europe in the long term. I could give many examples of this, but the most obvious one are the Spanish universities that are incredibly bad on an international level, they don’t show up in any of the meaningful rankings. Spain has the 12th largest economy in the world, yet it has nothing to show for in the educational field except for some private universities like IE and IESE. In the last decades, we haven’t received any Nobel Prizes in scientific disciplines, and we haven’t made any important scientific discoveries compared to France, Italy and Germany. Neither does it have a high level of technology, nor is able to live off our own innovations. The lack of excellence is a cancer that afflicts the entire Hispanic culture. Imagine how the world would be if tomorrow it decided to live only with what has been invented in Spanish?

In Spain we have a population that is not well educated enough to compete in a globalized world. A huge portion of the population is only prepared for one of two industries: construction or tourism. One of the industries, construction, is already dead. The other industry, tourism, only creates seasonal and badly-paid employment. I believe that if someone were to examine unemployment in Spain, they would conclude that most of it is derived by the fact that an enormous part of the population was educated to do something related to construction, an industry that no longer exists and that will never be nearly as big as it used to be. And considering the importance of tourism, the low level of English spoken by the vast majority of Spaniards is a real shame – this is true when it comes to waiters and other staff, and even the Prime Minister-elect, Mariano Rajoy, whose inability to speak English inhibits him from fully understanding the world around him. In Spain it sometimes seems like people take pride in ignorance. It’s hard to explain this unless you live outside of Spain or know the North American, British, French, German, Scandinavian and Japanese cultures of excellence well. It’s as if wanting to be really good at something, wanting to stand out and to be better than the others turns you into a pariah in this country.

When looking closer at the origins of Spain’s problems, it becomes clear that only a small part of the local crisis is related to the international crisis. Let’s assume that about a third of unemployment was caused by the international crisis. The rest, which takes us to the sad figure of 21%, has to do with the lack of training of the average Spaniard, a proper training that could enable them to do something genuinely meaningful. There is also a lack of incentives for companies to make up for the government’s shortcomings in education and adequately train their employees, which would ultimately benefit the entire country. Another problem, and one that contributes to the extremely high youth unemployment in particular, is the forced severance pay system, which hinders young people from being admitted into the workforce. Young people also lack access to housing, as even with the crisis, prices for real estate and rents are still out of proportion and will probably remain at their high levels since so many people are trapped by their mortgages. Being young in Spain is sad. The few jobs this country has are held by older people who are not going to leave, even if this makes the overall situation even worse. That’s why the best are leaving the country.

The underlying problem in Spain, meaning the disconnect between what its labor force can do and what the global market needs, is a problem that will take at least a decade to solve. It’s also a problem that will be solved by companies, if anyone is to do it. But for companies to solve this problem, the government needs to get out of the way. Nowadays, many people in Spain are so-called “mileuristas” – people earning 1000 (mil, in Spanish) euros per month or less. But in reality, the term “mileurista” is a misrepresentation, since a person earning 1000€ per month in fact costs the company 2000€, twice as much as she actually receives. The other half is squeezed out by the government in form of social security contributions, income taxes, value-added taxes, etc. Of course these people also receive many services from the government in return, such as healthcare and education, but the government has already reached its limit as to what it can take away from employees in the form of taxes and how many jobs it can create. The budget deficit is huge, making it easier nowadays for companies to get loans than for the government, in which no one trusts any longer.

In this situation, it’s not that companies need help, but the government needs to stop forcing them to be job creators and agents of the welfare state at the same time. They shouldn’t have to pay enormous social charges for every job that they create, and they shouldn’t have to make high severance payments if things go wrong. What companies need is a government that doesn’t drown them in taxes and other covenants. A government that is laissez-faire in terms of business, at least when it comes to job creation. It’s terrible being an entrepreneur in Spain, I already wrote about the subject, you can be ruined for life as your liability is unlimited. The only thing that compares to this is having a mortgage in Spain, under the unbelievable pro-bank rules that exist here. A person cannot simply give up ownership of the home they used as collateral for the loan, as is possible in the USA, but remain slaves of the bank for their entire lives or until they somehow find a way to pay off their debt. Something has to be changed now to give back mobility to the Spanish so they can move to where the jobs are. In Spain, unemployment is regional – low in the north, and high in the south.

I know that in other countries companies are also required to be social agents, this is the case in the Scandinavian countries, but the difference is that there, companies have a more educated and ethical population at their disposition thanks to the successful measures of their governments. Also the entrepreneurs from those countries are much more educated and ethical than the Spanish. In Spain, the problem of poor education and lack of ethics is fairly widespread: businessmen, politicians and workers are all affected. That’s why this country needs to reinvent itself and change, which could finally happen because of this crisis. Spain lived through decades of artificial growth, partly because the same system used to measure GDP growth falls into the fallacy of considering debt as growth, but this is over and due to the crisis, people are rethinking the system and want to improve.

What Spain needs is a government that doesn’t penalize job creation, so that companies can hire more and take more risks. It’s not so much Spanish companies that are involved in a huge mess right now, but rather the government itself. And only way for the government to fix its problems is with the help of companies, who nowadays pay less for their debt than the Spanish state, a state that nowadays lives on charity from the European Central Bank. If it weren’t for this institution buying Spanish debt, Spain would have no credit since its citizens have lost trust in their government and will not invest their savings in it.

What I hope is that the political party now in power, the People’s Party (PP), will manage to unleash the forces that will pull the country from ruin. Creative forces, forces that help build a new country. The past party, the PSOE, could have done this, but now it represents the status quo; those who are part of the problem, not the solution. It represents big business, big banks, state officials, unions. The PSOE should represent those who are unemployed but want to work, but instead it represents those who have jobs and housing and want to maintain their privileges while blocking out the others. It represents those who do not want to lower housing prices or increase productivity and make us more competitive so that more people could have jobs and housing. It represents state officials who can’t be fired, no matter what they do, and incompetent workers who hide under the concept of “unfair dismissal” that always blames the employer. In Spain, a salesperson who does not close any contract in a month, but works in a team that closes 10 a month can’t be fired for being useless. This happened to me at Jazztel. Even in such a clear-cut case where an employee is unable to carry out his job, the employer gets blamed when he fires that person. This is simply unacceptable. There has to be a way of suspending people, just like there was in school. There has to be a way of promoting the good guys and moving the bad out of the way. There has to be a way of cultivating excellence, of competing on a global level and winning. In Spain there are incredibly good employees. I see this at Fon, which from this country has created the largest WiFi network in the world with a great team. This country has its clusters of excellence, as the case of Fon, Inditex and other companies shows, especially in the sector of alternative energies where Spain is among the leaders of the field. But so far, these are still small islands in a sea of mediocrity. And it’s about time to change this. Building a business in Spain is still a struggle against a society and a government that does not understand the entrepreneur – this is not  how it should be.

Now my case

I have 5 children ranging from a few months to the age of 21 years. My oldest daughter, who studies at Columbia University and is graduating in few months, already has several job offers in the United States. But she’s thinking of starting her own business instead. But not for a moment has she considered starting that business in Spain. And why would she, when countries like the US or the UK are welcoming entrepreneurs with open arms. Everything is easier there, and the appreciation for the work of entrepreneurs is also much higher. And herein lies the challenge for Spain’s government. The most educated part of its workforce is drawn to other countries where their skills are highly sought after, and at this point in time there are not many incentives for them to stay in this country. The government needs to prevent a brain-drain by making it much more attractive to work in this country and innovate, both from the perspective of entrepreneurs as well as that of employees.

I came to Spain and started Jazztel, Ya.com and Fon here, but it seems like my days in Spain are also numbered. The governments in Ireland and the UK have been trying to attract me and convince me to move to their countries, and they are succeeding. They know that the new arms race is not won by those with the most atomic bombs, but by those who have the most “atomic entrepreneurs,” entrepreneurs with ideas that create jobs. That everything depends on a dynamic, creative and strong economy. But here, in this country that I love so much and where I raised my older children and now bring up my young, I get insulted for being successful, I get too many people calling me “rich bastard” to feel comfortable, and the government is not putting any effort into keeping me here, grow Fon and start new companies.

In Ireland and in the UK, the Prime Ministers gladly receive visits from and listen to entrepreneurs. Both David Cameron and the Irish authorities invited me over. Here, Zapatero completely ignored all entrepreneurs. But this was not so much his fault. Zapatero saw that the average Spaniard didn’t understand the role of entrepreneurs and businessmen. They don’t see them as what they are, job creators, but as rich thieves. As a result, Amancio Ortega, a national hero, now lives like a “fugitive” in his own country. He doesn’t show up anywhere because being the richest man in Spain isn’t an honor, but a shame, despite the fact that Inditex is the source of tens of thousands of jobs. If he were English, Amancio Ortega would be knighted, Sir Amancio Ortega, and he would receive the same kind of appreciation and recognition as other English or North American entrepreneurs. What Zapatero does by mistreating those who create wealth is to respond to a public that does not realize that unemployment and minimum wage jobs would decline if Spain had many entrepreneurs competing among each other for employees’ skills. As a society, if we keep biting the hand that feeds us, we will go hungry. While we remain a society where future Amancio Ortegas live in hiding or leave the country, we will continue being the champions of unemployment. I hope that the PP realizes this and will do its best to change it. The PSOE didn’t see it, which left us in our current situation. But as most entrepreneurs, I am an optimist and I believe that there is nothing that is so wrong in Spain that it can’t be changed with what’s right with the country. The Spanish people want and deserve something better. I will continue having Spain as a reference for building companies, and depending on how the situation evolves, I will be more or less around this part of the world that I love so much. I hope that Spain will finally realize its problems and, by standing united, will manage to reinvent itself.

Follow Martin Varsavsky on Twitter: twitter.com/martinvars

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