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, Europe editor Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this
    +5

    Comment number 35.

    To be honest, I think everyday we are closer to violence than any improvement on the social and economic situation. This country is ruled by the most pathetic bunch of idiots in the hole world. I think I'm still short on the definition. Best wishes.

  • rate this
    +3

    Comment number 34.

    Well, I'm spanish and unemployed. I don't have a degree in economy but I've been talking exactly about this situation since 2003.The major problems in this country are several and there is not a solution ahead,no one that I can see.Politicians corrupted, public services and administrations corrupted too, justice failing and a population that has been blind too long.I'm sorry no space to go further

  • rate this
    -1

    Comment number 33.

    29. Japan ?

    It is not about debt or deficit or austerity.

    It is about tax evasion or avoidance, corruption. Zero tolerance. Not that easy to enforce. As for corruption and evasion, too easy to name examples in places and countries where many media say you shouldn’t expect it. HSBC anyone ? Enron ? Helmut Kohl ? Sir Mark Thatcher ? PRC ? Far too easy.

  • rate this
    +3

    Comment number 32.

    The question of HOW, exactly, European people could be rid of the Brussels elite is a deep, deep question. It calls into question the very nature of power and government.

    The EU is not democratic. It can't be voted away. All previous referenda asked if you want MORE europe, never less. So one can say "no more", but never "yes less".

    Have you seen how a snake eats its prey? One bite at a time.

  • rate this
    0

    Comment number 31.

    There must be more to it than the raw figures. Black market work must be endemic now. You claim and you do a bit of cash in hand casual labour too..... Bankers cheat and get away with it and caused this mess so it is only right everyone else cheats too right?

    I think the black economy will ultimately prove more "real" than the official version and outlast it. A quiet revolution in a way.

  • rate this
    +7

    Comment number 30.

    Corrupt bureaucrats, bust banks, growing public debt, massive unemployment and now, as in Portugal, mass emigration of the educated young (plus all the children this age group will have). Two generations of declining population robs both nations of any prospect of GDP growth for decades and leaves the elderly and unskilled to repay impossible debts
    And Brussels still doesn't get it!Or not want to?

  • rate this
    +1

    Comment number 29.

    There is a prevailing and tiresome chant that "austerity doesn't work".

    Austerity is NOT a policy. One doesn't try it out from choice, any more than one tries being poor, or sick, to see how that goes.

    Austerity is a nice way of saying you are broke. No money, no more credit.

    This delusion that Europeans can keep spending money they do not have speaks volumes about the nature of the problem.

  • rate this
    0

    Comment number 28.

    Let´s begin at the beginning.

    --under Franco the demonstrators would have been shot.

    --and go from that fact when discussing Spain --and the Billions it has squandered --shall we ?

  • rate this
    +1

    Comment number 27.

    Spain's unemployment rate is worse every day. There are unemployed people who don't have enough to eat.
    PM Mariano Rajoy has acknowledged 2013 will be a bad year (as though 2012 was not bad enough!).
    IMF says Spain's economy will contract by 1.6%.
    Meanwhile, Rajoy promises reforms (to be presented Friday) making economy more flexible, more competitive...I can't wait to see these!

  • rate this
    +1

    Comment number 26.

    Re 21. Europe hasn´t failed, the euro may have, and austerity certainly has.

  • rate this
    0

    Comment number 25.

    FYI 4

    By the way, have you heard about taxes & Uli Hoeness ? http://www.bbc.co.uk/news/business-22262812 Yeah … And the last one is on immigration & crime http://www.bbc.co.uk/news/uk-22268015

  • rate this
    0

    Comment number 24.

    FYI 3

    Re: http://www.bbc.co.uk/news/business-21544328

    As for debt and austerity, we all should by now know about the “definitive” evidence provided by Reinhart & Rogoff and promoted by all the Very Serious People (as Krugman would say) on both sides of the pond, especially by Mr. Weidmann at the BB and Mr. Rehn at the EC.

  • rate this
    0

    Comment number 23.

    FYI 2

    Re: http://www.bbc.co.uk/news/business-21544328

    As for deficits, yeah, Germany is at +0.1%, the next is … Italy, at -2.9%. The UK is at -6.3%.

    PS: Italy, as (very) dysfunctional as it is, it has not been bailed out by the ECB/IMF, and, given its deficit, current and forecast, there’s no need for a bailout.

  • rate this
    0

    Comment number 22.

    FYI 1

    I beg you pardon.

    As for

    “The fear, in Europe, is that France is sliding into the camp of southern European countries, with little or no growth”

    EC data published here at the BBC
    http://www.bbc.co.uk/news/business-21544328

    It doesn’t seem to me that there has been any growth at all in the EZ (bar Germany) or in the UK in 2012, and growth is about +0.7% in Germany.

  • rate this
    +1

    Comment number 21.

    there`s no serious argument against the fact that Europe has failed, it failed because it was an inflexible bureaucratic monster that couldn't adapt to the changing world, things that survive have a common trait they can adapt, a business having to make a different product, a musician changing musical style, a bird coping with different weather patterns for example,

  • rate this
    +6

    Comment number 20.

    The EUcrats really couldn't give fig about how many unemployed there are in the eurozone - provided their precious 'project' stays on track...

  • rate this
    +5

    Comment number 19.

    Currencies have been disbanded before, if it is planned it can be done with minimal damage.
    Much harder EU elites letting go of inflation busting, tax free perks

  • rate this
    +5

    Comment number 18.

    The Prime Minister, Mariano Rajoy, says: "Next year we will have growth and jobs will be created in our country."
    Last year Rajoy promised growth for this year. Everything is manana in Spain.

  • rate this
    +3

    Comment number 17.

    "things will only get better when the Euro is disbanded"

    By whom, exactly?

    Getting rid of the Brussels elite is much, much more difficult than it sounds. For a start, there are a lot of people who benefit hugely from the EU, and they (literally) own most of the member states. And they sponsor the major member state parties.

    Getting rid of the EU is like getting rid of feudalism. Easily said.

  • rate this
    +15

    Comment number 16.

    things will only get better when the Euro is disbanded and national currencies find their true worth.
    At what human cost is the Euro worth?

 

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