Why there's no easy way out of Spain's insurmountable economic mess

In a new report Simon Tilford at the CER also pours cold water over the dominant narrative of the Spanish recovery. "There is no evidence that [growth numbers] are the result of austerity, and not much evidence that they are the product of structural reforms." " title="<--break-->" class="mceItem">

Instead, he paints a picture of a fragile economy that has benefited from a number of headwinds, but remains acutely vulnerable to another global downturn. Here are some of the insurmountable challenges that are set to condemn Spain to more economic pain.

...But buoyant exports have also been accompanied by falling imports, as suffering Spaniards have endured lower living standards and high unemployment, notes Mr Tilford.

The composition of the exports is also a cause for concern. More than half of the growth has come from "low-value" goods such as food and fuel.

There is nothing worrying in this per se, but it does undermine the claim that the country's export success is directly linked to much-vaunted structural reforms and deregulation.

"Were Spanish reforms boosting innovation and productivity, this would be showing up in a structural shift in favour of higher-valued goods in the composition of Spanish exports," says Mr Tilford.

..."Despite firms, households and the government trying to save more and spend less, and banks shrinking their balance sheets, Spain’s overall debt level is higher than in 2008," finds the CER report.

As Mr Tilford writes: "Business cycles seem to be getting shorter and downturns deeper." In this regard, Spain "will have few policy tools at its disposal to combat a renewed weakening of domestic demand".

......In the words of Mr Tilford: "Spain faces plenty more pain."