Spain is one more time suffering from its endemic disease that was thought by many to be a history of the past. Unemployment in Spain is increasing at a rate of 3,179 new unemployed per day, which is a faster rate than that of the last economic crisis in 1993. The unemployed have now reached 2.6 million, the largest figure in the last 11 years. According to The Economist Spain’s unemployment rate is now the worst in the Euro-zone at 11.3%, just above Belgium’s 11.2% and well the Euro-zone’s average of 7.5%.
Unemployment in Spain reached its historical peak in 1993 surpassing the 20% mark. I talked to Jaime Garcia-Legaz about unemployment last June. Garcia-Legaz is Secretary General at FAES, the leading conservative think-tank in Spain. Garcia-Legaz anticipated the increase of unemployment by one million a year at a time when many could not foresee the depth of the crisis. The Spanish economy continues to underperform its European peers in many areas including the inability to increase productivity, the lack of flexibility in the labour market, a skilled labour with a severe lack of language skills, and a lack of mobility across regions.
In an environment of increasing unemployment Spanish Premier Jose Luis Rodriguez Zapatero and Opposition Leader Mariano Rajoy agreed to meet earlier this week in La Moncloa to find common ground in the proposition of economic reform. The presumed understanding only lasted one day. The recently approved Fiscal Budget for 2009 has again divided Socialists and Populars. In the meantime the Bank of Spain warned against a deepening of the crisis. Unemployment rates in Spain were almost always in the double figure range. Only during the first term of Jose Luis Rodriguez Zapatero between 2004 and 2008 did unemployment rates reach levels under 10%.
Why does unemployment remain in Spain? Why is the country consistently unable to approach single digit rates that are a commonality in other big European economies? Last week Zapatero was in New York and preached on Spain’s ability to surpass France in per capita income. France’s unemployment stands at 8%. Spain will not be able to continue converging in per-capita-income terms with the larger economies in the Euro-zone if the country does not solve once and for all the cyclicalities of its unemployment, that suffers more variability and larger swings than that of any other developed nation.
Since 1979 Spain’s Centro de Investigaciones Sociologicas (CIS) has published Opinion Barometers with the issues that most concern Spaniards. A relatively independent instituiton, CIS’s Opinion Barometers are considered credible and politically unbiased and have throughout the recent democratic stage pointed out the concerns that are at the forefront of Spaniards’ agendas. In the last monthly Barometer published, last July, Spaniards were asked what were the main problem facing Spain. The economic crisis topped the ranking with a 33.9% of the popular vote, immediately followed by the unemployment at 29.0%, immigration at 8.4% and the housing market at 5.9%.
Originally published at 5spaniards.com on Oct 4, 2008 and reproduced here with the author’s permission.