President Mariano Rajoy of Spain is gambling on austerity to turn
around his country's debt crisis
Scottish news: Economic crisis deepens in Spain
by Jamie Mann
Unemployment in Spain has reached its highest rate in 18 years with almost a quarter of people now out of work.
New figures from the National Statistics Institute show that Spain’s unemployment rate rose to 24.4 per cent in the first quarter of this year.
Headline economic data:
- Spain’s economy (roughly €1 trillion) is the fourth largest in Europe and the 12th largest in the world.
- Spain sports an official Debt to GDP of 68% and a Fiscal Deficit between 5.3-5.8% (as we’ll soon find out the official number)
- Spain’s unemployment is currently 24%: the highest in the industrialized world.
- Unemployment for Spanish youth is 50%+: on par with that of Greece
The situation continues to worsen as the Eurozone country continues with its contraction since the start of the crisis.
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Jobless rates the last quarter of 2011 at the end of December sat at 22.8 per cent, rising by 1.6 per cent in the first quarter of 2012 at the end of March.
This news comes alongside a two-notch downgrade by ratings agency Standard and Poor’s highlighting risks of unsafe loans made by Spanish banks.
JP Morgan expects that Spain will experience mortgage arrears if the number of people out of work continues to surges.
Alfredo Saenz, Chief Executive of the Spanish banking group Santander called this prediction “stupid”.
Speaking to Bloomberg, the CEO said:
“Mortgages get paid in good times and in bad,” he said in a news conference at the bank’s headquarters outside Madrid. “Anyone raising this problem as one of the issues for the Spanish financial system is saying something stupid”.
Saenz was banned from working as a banker for three months last year after he was convicted of making false accusations against debtors.
With yields raised by the international debt market, a deeper recession could be imminent if a mortgage crisis occurs and high-street banks collapse. The Spanish economic boom was a housing bubble fueled by Spain lowering its interest rates in order to enter the EU, not organic economic growth. The US's crisis resulted in a huge contraction because it had an 11 month supply of empty houses - Spain has approximately a 7 year supply which underlines just how much pain Spain faces.
As in the UK, stimulus packages served only to increase the nation's debt-load fixing nothing and leading to austerity measures which have been severe resulting in public tensions which have boiled to the surface with thousands attending a general strike across Barcelona, Madrid and other cities protesting cuts.
The Prime Minister of Spain, Mariano Rajoy recently voted on the draft general state budget for 2012.
Speaking of the vote, the Prime Minister said:
“At this time, I think it's important to stress that the Government has the strength and that the Government has the ability to take decisions that are good for Spain. The effects won't be felt in the short term.
“We already knew that and we've said so on many occasions but, in all honesty, we're doing what needs to be done”.
Spanish unemployment has more than doubled in the last four years leaving the country with the highest unemployment rate of the 17 Eurozone members.
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