The Spanish unemployment rate hit 17.9% at the end of the Q2 2009, according to Spain’s National Statistics Institute (INE), the highest level in the eurozone and well above the 8.9% average of the 27 EU member states. In fact, Spain makes up over half of the past year’s increase in eurozone unemployment, with over 30% of the eurozone’s jobless living in Spain. The Organization of Economic Cooperation and Development (OECD) predicts that Spain’s jobless will reach 20% of the workforce during 2010, gradually edging closer to the historic high of 24% recorded in 1994. Youth unemployment is particularly severe, with one in three workers under 25 years old facing a prolonged period out of work. At the end of the Q2 2009, Spain’s GDP was down 4.1% y/y with domestic consumption expected to fall 4.5% by the end of 2009.
The large number of unemployed not only presents obvious economic difficulties for Spain such as falling productivity and a heavy drag on demand but the social consequences are also being felt. Protests have erupted across Spain as citizens struggle to deal with the economic crisis. Jobs have become the primary concern for the electorate, overtaking terrorism at the start of the year. Every country across Europe has suffered from the economic contraction. Yet Spain’s catastrophic housing collapse and towering unemployment figures make its plight stand out. The downturn has been aggravated by Spain’s rigid, antiquated and embedded labor regulations. As Luis Garicano of the London School of Economics argues, “that the crisis has hit Spanish employment disproportionately is due to the catastrophic way the labor market works.” Unless action is taken to remedy the underlying causes of Spain’s unemployment crisis, the country faces a prolonged and dire recession.
Source: RGE
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