Spain: unemployment crisis may be stabilising
The Lehman Legacy
An unemployed computer engineer makes bracelets to sell on a street corner in Madrid in 2012.
When the global downturn took hold in 2008, Spain was coming to the end of a decade-long boom which had left it brimming with confidence. The prime minister at the time, socialist José Luis Rodríguez Zapatero, declared that Spain had “perhaps the most solid financial system” in the world.
Soon after, Spain’s economy was hit by a crisis that has been unprecedented in terms of its duration and effects. It would lead to a double-dip recession, send unemployment soaring and strip the banking sector of its credibility. Of those problems, unemployment has been the most visible symptom of Spain’s troubles, rising from 8 per cent in 2008 to over 26 per cent today.
A shrinking economy has been in great part to blame for this, but so too has Spain’s labour market, which is heavily dependent on flimsy, temporary contracts. Workers on these contracts – most of whom are young – are the first to be laid off, even when they are well qualified. This helps explain how the jobless rate among under-25s has risen to close to 60 per cent and also why many Spaniards are looking elsewhere for jobs. According to recruitment firm Adecco, 390,000 people left Spain to seek work between 2008 and 2012; 30,000 Spaniards moved to Germany last year alone.
But the biggest culprit of Spain’s woes over the last five years is the property bubble that burst just as the global crisis hit. The ensuing paralysis of the construction sector left hundreds of thousands of labourers out of work, many of them immigrants who had been drawn by the boom. House prices have fallen by a third since their 2007 peak, and are still dropping. This revaluation and the difficulties Spaniards face in paying their mortgages have had a knock-on effect for banks.
Last year’s government rescue of Bankia, the country’s fourth-largest lender, followed by its nationalisation, highlighted how Spain’s financial sector had over-exposed itself to an inflated property market.
The conservative Mariano Rajoy took power at the end of 2011, promising to tackle the economic crisis. While his adherence to austerity has caused his popularity to plummet and arguably prolonged the recession, there are signs that the unemployment crisis is now stabilising and that a recovery – albeit a weak one – is on the horizon.