EU austerity: No quick fix for Spain


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It is the one set of figures that European officials fear: the quarterly statistics on unemployment.

For amidst all the sightings of green shoots, the lines of those without work serve as a reminder that the crisis in Europe is far from over.

In Spain, the general unemployment level has risen to 27.16%. It means there are six million without work.

The government in Madrid has tried to draw some comfort from the fact that the rate at which jobs are being shed is slower than in previous quarters. The Prime Minister, Mariano Rajoy, says: "Next year we will have growth and jobs will be created in our country."

It is, perhaps, the fate of leaders that they are destined to live in hope. So far, the government has misjudged the severity of the recession. The economy is expected to decline this year by 1.6%.

Spanish nightmare

In the southern Spanish city of Jerez, unemployment is close to 40%. It is not difficult to find couples like Lorenzo Barba and his wife Yolanda. He lost his job - driving trucks - two years ago. His wife was laid off from the hotel sector.

They are under threat of being evicted from their apartment. They scrape by. The fridge is almost empty. For five months, they have not been able to afford fish or meat for themselves in order to give their seven-year-old son a balanced diet.

"There is no future in Spain,' says Lorenzo Barba.

Lorenzo Barba with his wife and son at home in Jerez Lorenzo Barba and his family are going without food and could be evicted from their flat.

"Three generations are being destroyed - mine, my parents' generation because they are supporting us. And the worst part is what will happen to my son."

And herein lies the Spanish nightmare. For the country to see unemployment decline, it needs growth of more than 2%. No one is predicting that at the moment.

So as Daniel Fernandez Kranz, from the IE business school, points out, it is likely that unemployment will continue rising for three or four more years. That will test the resilience of Spanish democracy.

There is some good news from Spain. Its borrowing costs have fallen to levels not seen since 2010. The country is judged as less risky by investors. The current account is moving towards balance and exports are up.

Daniel Fernandez Kranz says it is a story of two economies. The large companies are benefitting from the lower wage costs but the smaller companies, which are the lifeblood of the economy, are still shedding staff.

And perhaps the most important fact to remember: economic activity is still declining. Tough times still lie ahead for Spain.

French slide?

France is waiting for its unemployment figures, which are also due. They, too, are expected to increase and that will be acutely embarrassing for President Francois Hollande who promised, during his election campaign, to bring unemployment down.

Although some steps have been taken to free up the labour market, it remains a daunting task to set up a new business in France and take on staff.

Start Quote

I call it balancing the budget. Everyone else... austerity”

End Quote Angela Merkel German Chancellor

The fear, in Europe, is that France is sliding into the camp of southern European countries, with little or no growth, rising unemployment and declining consumer and business confidence.

In terms of its influence, no one can remember when France counted for so little in Europe.

Today's figures will only reinforce what I wrote about earlier in the week - the retreat from austerity. Spain will miss the target for cutting its deficit but will discover that Brussels is more relaxed and, most likely, will give Madrid more time.

Growth has replaced reducing debt as the priority. You can sense Angela Merkel's unease about the resistance to austerity when she said: "I call it balancing the budget. Everyone else is using the term austerity. That makes it sound like something truly evil."

Today's figures may persuade the European Central Bank to cut its interest rate and the markets will cheer that.

But today also underlined what the President of the Bundesbank, Jens Weidmann, said this week - that it might take a decade to exit this crisis and that will test democracy, social cohesion and support for the European project.

Information published by the European Council on Foreign Relations found that 72% of people in Spain said they did not trust the EU.

Gavin Hewitt Article written by Gavin Hewitt Gavin Hewitt Europe editor

UK caught up in new EU budget row

UK politicians react angrily to news that a £1.7bn (€2.1bn) surcharge will have to be paid to the EU by 1 December, while France and Germany get a rebate.

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  • rate this

    Comment number 15.

    Peter, if you are looking for a classic "revolt", it isn't going to happen. I'd say Italy is a good model for how things will go elsewhere.

    There is a guy who says "I want to tear the entire system down". His radical new party won so many seats in parliament that the other parties have grouped together in fear. Far right and far left are uniting to keep "their" system intact. The "party" system.

  • rate this

    Comment number 14.

    Olli Rehn's (the head of european economics) "tipping point" that 90% debt to gdp leads to a dramtic fall in growth has been shown to be utterly wrong and based on faulty research.
    Millions of people unemployed, huge social hardships not to mention a masive increase in suicide rate.
    Meanwhile germany's exports benefits from a weak currency.

  • rate this

    Comment number 13.

    Until the Financial sector and the top 1% are punished for their greed, and the pols who support them lose office, the decline will continue. The poor and middle class have been bled dry and have nothing more to give. Like the 'reparations' after WWI, the draconian imposed austerity to satisfy the Bankers will lead to a revolt of the People. Nothing left to lose means exactly that.

  • rate this

    Comment number 12.

    To all those who hear the "anti austerity" policy message from the party member elite, please understand exactly what this means.

    Ending austerity is not possible via the markets, and so the only way is to print Euros, and distribute the euros via a centralized taxation authority.

    Such an powerful authority means the end of all democracy in Europe. Make no mistake about that. It is "the plan".

  • rate this

    Comment number 11.

    Whatever your opinion, one thing that we can surely agree on is the incredible way in which the ordinary Spaniards are coping with this. We live here, see and feel their pain and yet the spirit is (as yet) undimmed and even in an honest conversation about the problems, a smile and act of kindness is never far away. I sincerely hope that they can begin to come through this soon and there patience..

  • rate this

    Comment number 10.

    I have lived in Southern Spain for years. The situation is complex. Yes headline unemployment is high but there is a huge black market that provides support. Key is actually youth unemployment - in my town it is 90%. There is endemic corruption in ever facet of government from the town hall up and endemic tax evasion. Most Spaniards complain but accept it. Until they don't things will not improve.

  • rate this

    Comment number 9.

    It's worth putting the EU's achievements into context. At the very peak of the worst period of unemployment in the USA during the Great Depression, the figure was just shy of 25%. As a whole, Europe isn't quite there yet.

    The danger is that the EU, which caused the GED, will also promote itself as the saviour. It can do that. It can devalue the Euro, and end austerity, by creating a total state.

  • rate this

    Comment number 8.

    When didn't EU and IMF leaders sound an optimistic note? Every slight blip no matter how small or singular bucking the trend a sure sign the good times are just around the corner. UK + 0.3%. How much more bad news of decline can the Euro and the EU withstand. Popularity of the EU is at an all time low in the 6 largest EU economies.

    Burning building, no exit.

  • rate this

    Comment number 7.

    What the EU are doing is disgusting. They knew these countries couldn't afford to enter the EU/adopt the Euro and still then went ahead with letting them join. Germany is reaping the benefits. When are the people going to wake up and realise there is life without the Euro and EU. Get out!! Stop banker bashing and let the EU accept the blame.

  • rate this

    Comment number 6.

    "that will test democracy, social cohesion and support for the European project"

    Support? Does he not know what way the wind blows on this sovereign Island? Wait til the unwanted 'Roma' start arriving...

  • rate this

    Comment number 5.

    Spain is rife with corruption - the politicians are the worst- followed by bureaucrats in town halls. Jumping on the bandwagon e.g Local police in Ibiza dragging Europeans on driving infractions to the nearest cashpoint and demanding 300 euros or else - apply that higher up the pecking order. Spain still traumatised Franco. Corruption has destroyed Spain and left it morally bankrupt as well.

  • rate this

    Comment number 4.

    Curiously waiting to read how the EUphiles will try to spin this story into one of positivity.

    I mean, surely, by now, even a Chimp in a check suit can see that the EU has failed more than a hundred million of the people it purports to represent.


    Perhaps when Spanish unemployment tops 33% then?

  • rate this

    Comment number 3.

    The banks didn't borrow the money. They lent it. Governments...and their beneficiaries... spent it.

    An "end to austerity", whilst sounding great, actually means the banks will have to lend even more money to European governments.

    Good luck with that! We've already seen a "no austerity" policy, in Greece. The bond markets destroyed it.

    Austerity isn't a choice. It's a reality.

  • rate this

    Comment number 2.

    I am far from being a Socialist but there are a generation of people who will never forgive the banks for the disaster they led us to. What galls so many of us is that the bonuses (for wrecking the banks and the economies), just carried on being paid. There should be prison sentences for some people, not bonuses.

  • rate this

    Comment number 1.

    "Tough times still lie ahead for Spain."

    Tough times lie ahead for those who still believe "we're all in this together".

    A lot of people with access to EU funds have become unbelievably rich since the mad debt spending spree began, 30 years ago. These people are still making vast profits from their party connections.

    The EU hardly makes everyone poor. For some, it is a fountain of gold.


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