Spain's Pain Getting Worse
Badly battered by the all-enveloping
eurozone crisis, Spain's economy has shrunk, again. In the January-March 2013
quarter, the economy contracted by -0.5%, as against contraction by -2% in the corresponding
quarter last year. This means the country’s economy has contracted for seven consecutive
quarter now.
The
government in Madrid believes that growth will falter again this year, as it announced
that the economy will contract by -1.3% in this financial year. Ever
since the euro crisis began in 2008, Spain, which witnessed its massive real
estate bubble burst, has struggled to stay afloat, especially in the face of
mounting debts and rising unemployment.
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Rising unemployment
Rising unemployment is
eating into domestic demand, thus setting in motion a vicious cycle of low
demand-falling revenues-low generation of jobs-rising unemployment, which, in
turn, meant that fewer people would have income that would help them buy
stuff.
In other words, unemployment
rates typically move in a cyclical way as they are largely related to business
cycle, especially in the short and near medium long term. In addition to business
cycles, government policy (especially labour policy), population trends, and to
some extent, global economic environment (especially in case of export-oriented
economies) determine the rates and levels of unemployment in the long run.
According to Eurostat, among the
eurozone member states, Spain has the second highest unemployment rate, at
26.6%, just behind another badly bruised eurozone member, Greece, where the unemployment
rate is hovering around 27.2%.
In fact, if Spain’s National
Statistics Office is to be believed then it already has the highest
unemployment rate at 27.2% of the workforce.
To make matters worse, the youth
unemployment rates are even worse, with over 55% of young Spaniards not able to
find work.
It is unlikely that Spain will come
out of recession anytime soon. Till it emerges out of the economic doldrums, the suffering of the Spaniards will continue.
Stories of suffering
The BBC website carried a collection of stories of ordinary Spanish folks hit hard by a triple whammy
caused by the serious downturn in their country’s economy: huge debts to pay,
lack of jobs, and thus lack of income. I share the story of one such family:
Angel Moran is 53 and has
been out of work now for five years. His wife, Conchi, is 48 and has been
unemployed for four. Their home is one of 1.9 million in Spain in which no-one
has a job, according to the latest unemployment figures.
They receive state
benefits of 426 euros (£358) a month and rely on food handouts from the Red
Cross.
"Our gas has been
cut off and we can hardly pay the water. After paying the rent, there's nothing
left for food."
Their daughter Noelia is
26 and she is also unemployed. Her 25-year-old boyfriend also lives in the
house and he is also unemployed.
"I can't get my own
place with my boyfriend," she says. "I can't afford to have kids. And
you just have to think about every cent you spend."
Read more of such stories
here.
