Supreme Court In Spain Open To FIT-Cut Lawsuit

Europe’s best performing economy by far has been the UK, a country that chose deep austerity. Finland, Sweden and Germany have also chosen (less severe) austerity policies and have seen strong growth.

Meanwhile, countries reluctant to opt for austerity (France, Belgium) have steen nothing but stagnation.

As for the PIGS: there austerity went too far. Everything in moderation remains an important dictum. However, it must be said that the two countries that went furthest in their reform (not just spending cuts, but also structural reforms), Spain and Ireland, are doing better than Italy that rejected austerity.

Some left wing economists villify austerity. Some German ordoliberalists see it as a panacea. Judging from European growth figures, it seems that both are wrong: austerity has a positive effect if done in moderation and with structural cuts (labor and pension reform) rather than massive cuts in investment and other discretionary spending.

Indeed. That’s exactly the argument I’m making, based on emprical observations.

Countries that reneged on promises or even defaulted on debts (Iceland, some Latin American countries) saw a quicker restoration of investor confidence than countries that burdenend themselves with impossible debts to honor excessive promises (Ireland, Portugal and others).

The effects of debts, both private and public, have an effect for decades. A retroactive, carefully targeted subsidy cut is forgotten after a few months in a world saturated with hot money looking for the next big thing.

Spain (and Portugal) are pretty much islanded – their only major interconnect is with France and it’s paltry.

Both countries want to vastly increase transmission capacity, but France is wary of allowing large amounts of current onto its own grid (it would need significant upgrades).

After much wrangling, the EU forced France to accept a doubling of the interconnect’s capacity, but even if that is built the capacity will still fall short of what’s required to export all of Spain’s surplus. That doesn’t leave much room for solar exports in that direction.

A connection with Morocco is under consideration, but the volumes involved there are equally small – and Morocco is building a lot of solar that peaks at the same time as Spain’s.

I totally agree with your second point, under normal circumstances at least. The current crisis has shown that retroactive changes to certain laws have a smaller long term effect than accumulating huge debts (compare Iceland and Ireland for example: Iceland decided to not to honor its deposit guarantees to foreign clients of its banks and managed, let their overseas arms go bust and started from scratch. Ireland took the opposite approach and needed a bail out from which it is only beginning to emerge).

Spain has little room for further spending cuts or tax raises and has seen its debts (both government and private) increase to painful levels. Given the returning uncertainty on the bond markets, I wouldn’t honor the (excessive) promises to solar installers either – after all, they still receive profit margins that are greater than almost any other investment of the same risk category.

That’s a good point.

Just like the FED in the US, the European central bank could invest in real assets. For instance, in renewable power plants and in a HDVC connection between Spain, the Balearic islands, Sardinia and Italy.
(Italy has significantly higher electricity prices than Spain.)

Btw, Spain is already connected to Morocco: link.