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
    -2

    Comment number 155.

    139 QOT

    "Ireland is ONCE AGAIN poor after the bubble burst -- were you ever in Ireland -- MH can tell you"

    Anyone who compares Ireland then to Ireland now knows nothing about the country.

    These population figures speak volumes:

    1841 pre famine 6.5 m

    1871 after fam 4m

    1926 falls to 3m and stays there until 1970's

    Today 5m again and no more barefoot beggar children

  • rate this
    0

    Comment number 154.

    144.Mr Naughty
    "Following your logicwhy people don't retire at the age40 there would be lots of jobs for youngsters"
    & 2 plus 2 makes 4. But I wasn't making it a suggestion, my point was that either decision, (lowering or increasing retirement age) has consequences and that increasing the retirement age will increase unemployment in the short term.

  • rate this
    +1

    Comment number 153.

    #146 & #126
    You are spot on! Terrible institutions are the reality in Greece, Portugal and Spain. Italy too.

    But this is no excuse for the imposition of Weimann-Merkel-style extreme and undemocratic governance

    No excuse for dismantling democracy, a reason for building it

    The currect crisis systematically demolishes south European institutions, to be replaced by a Berlin government

  • rate this
    -1

    Comment number 152.

    What salaries do these incompetent blackmailers get to which tax have to contribute to for the destruction of their economies and lives?

    It is true that the UK became too 'banking' oriented. Germany (Frankfurt) will take over that sector soon, too, be UK in the EU or not, because of UK's own stupidity.(and implementation of austerity).

  • rate this
    0

    Comment number 151.

    German retirement is 67 --some talk of 69 -- but too risky,if such as Greece can´t keep its mouth shut, collect taxes and pay its bills.

    -- if the new anti-Euro party gets a good election result --then Merkel will be restricted with the bail-outs.

    --If the Germans take to the streets -- the party is over.

  • rate this
    +1

    Comment number 150.

    Lots of Europeans tend to think about Chinese (Asians in general) as kind of "robots" in factories making cheap products. I have couple of Chinese friends (unfortunately I haven't been there yet) and they are intelligent, business-driven and ambitious individuals who can easily compete with us Europeans in terms of quality and skills while still much cheaper compared to EU and US.

  • rate this
    -1

    Comment number 149.

    Could someone tell QOT to learn to read? I guess we're all fed up with reading such tripe written just to cause upset and not solve anything constructively. I'm not asking the BBC to remove the insult. Let it stay there so we can all read the stupidity it reflects.

  • rate this
    -2

    Comment number 148.

    112 EU

    "I have read that the turnout was about 30%"

    Where? UKIP? Check some proper sites for the 1975 results:

    Staying in the EEC 67.2% on a 64.5% turnout
    ==

    114

    "I have seen your description of what East Anglia was like before we joined the Common Market - it was rubbish! I was there and remember"

    I lived there then and live here now - CAP has transformed us.

  • rate this
    0

    Comment number 147.

    Suggesting labour mobility can solve this crisis is bad economics!

    Germany welcomes able/specialised professionals, but not ordinary workers (East Germany unemployment is still 10%)

    No good for most of the 6m unemployed Spaniards

    Note the selection. The better ones can move making the rich country richer, leaving the poor country unable to grow

    Thank heaven German is so hard to learn!

  • rate this
    +1

    Comment number 146.

    #126. quietoaktree
    I can't talk about Greece or Portugal, there could be similarities, but sometimes I think the spanish democracy(that most of the people in this country is proud of) is founded on muddy waters. After 40 years of a dictatorship regime, a quiet transition to democracy means that those people in the power kept it. Their tentacles still today in finances, law,
    religion ....etc.

  • rate this
    0

    Comment number 145.

    #143 QueerZ

    "Soleved the problem with a little loss for Germany and limited sufferring in the EU, "

    --do your homework --then add up the total --Greece alone squandered 300 Billion !

    --If others can inform themselves before contributing --so can you !

  • rate this
    +1

    Comment number 144.

    @141

    Early retirement and short working hours is a French way of dealing with unemployment but if you retire at early age and then the rest of society needs to pay for you for 20 or so years then there is too much burden cost on companies and jobs go abroad.

    Following your logic,why people don't retire at the age of 40 - there would be lots of jobs for youngsters...

    South cannot afford welfare

  • rate this
    0

    Comment number 143.

    There could have been a quicker fix right at the beginning if the way Greece was handled by the TROIKA incompetents as henchmen for Germany had not spooked everyone. Eurobonds. Soleved the problem with a little loss for Germany and limited sufferring in the EU, instead of the worsening situation the TOIKA & its measures caused.

  • rate this
    -1

    Comment number 142.

    #141 kane

    --It´s a big cold, cold world out there --those little countries who clam they can go it alone (UK) --are free to try.

    --but one should not forget that when the Colonies left --they failed miserably --until today.

    All eggs were put into the ´banking Basket´ -- and scrambled eggs is the result.

  • rate this
    +1

    Comment number 141.

    #137MrNaughty
    "There are 6 mln unemployed inSpain that don't contribute anything at the moment. If they work abroad they can send part of income to family,back to Spain"
    "If" is a big word.

    "AsEuro welfaresystem gettingunsustainable and pensionersliving longer increasing retirementage is another poss"
    That'll make unemployment even higher at a stroke as jobs wont be freed up for longer.

  • rate this
    0

    Comment number 140.

    I have been travelling around the Philippines and India and I'll tell you - basically everybody speaks English there. IT sector in India is growing in super fast way. The jobs are outsourced from developed world.

    China having one child policy put stress on education of their children (new technologies R&D) so that Chinese companies have talented and cheap graduates.

    World is getting more equal!

  • rate this
    0

    Comment number 139.

    #136 pffft

    "Never attribute evil to those things that can be explained by stupidity"

    -- incompetent government (s) --was the implication.

    --so don´t attempt to diminish Fulano´s honest interpretation of events .

    Ireland is ONCE AGAIN poor after the bubble burst -- were you ever in Ireland -- MH can tell you all about it --if you beg her nicely.

  • rate this
    +1

    Comment number 138.

    Western Europeans cannot understand that in times of globalisation there are lots of "hungry for success" countries with much lower wages and getting increasing quality education that are determined to succeed.

    Putting it in other words there is much more competition in the world now. China isn't happy being cheap manufacturer any more they want to research and develop technologies and products

  • rate this
    0

    Comment number 137.

    @131kane

    There are 6 mln unemployed in Spain that don't contribute anything at the moment. If they work abroad they can send part of income to family (pensioners etc.) back to Spain

    As European welfare system getting unsustainable and pensioners living longer increasing retirement age is another possibility

    If you work abroad within EU your superannuation will be added up when you retire.

  • rate this
    0

    Comment number 136.

    116. Fulano_de_Tal

    Thanks link, May be this is the EU in a nut shell.
    "Never attribute evil to those things that can be explained by stupidity"


    128. quietoaktree

    "Ireland (a very poor country before the Common Market)"

    It still is,after their property bubble burst.
    Caused by another bubble,the low value of the Euro relative to Germany,caused surpluses,looking for investment opportunities

 

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