Greece has dominated the headlines of the Euro crisis so far and today is no exception: Eurozone ministers are meeting in Brussels right now to approve a second bail-out for the struggling Mediterranean nation.
Here at Latitude News, however, we’re turning our spotlight this week on Spain, the Eurozone’s fourth largest economy. On Sunday it’s estimated that over a million Spaniards took to the streets in 57 different cities to protest their government’s austerity measures (accurate figures were hard to come by: unions said 450,000 people marched in Barcelona. The government claimed only 30,000 had shown up).
At 23 per cent, unemployment in Spain is the highest in Europe. For those 24 and under the situation is even worse: youth unemployment stands at a shocking 46 per cent. In total, five million Spaniards are currently out of work as the economy continues to contract.
Last week the conservative prime minister Mariano Roy said that the problem is only going to get worse before it gets better.
It’s a rude awakening for Spaniards who only a year ago still had a Socialist government committed to extending the welfare state. But as the economy tanked last summer the Socialist prime minister Jose Luis Rodriguez Zapatero started rolling back benefits like a $3,500 childbirth bonus while cutting civil servants’ pay and freezing pensions. “We are going to have to do this whatever it costs,” Zapatero declared, “and whatever it costs me.”
Three months ago Zapatero paid the ultimate price as his Socialists lost in a landslide. The Conservative Party’s economic medicine has been even stronger. Roy has slashed public spending, rewritten labor laws, and raised taxes. For a time, the measures worked and Spain’s budget deficit shrank. Now, falling tax revenues are damaging the government’s case for fiscal restraint. The EU predicts that Spain’s debt will double by next year and the country’s credit rating, just four points above junk-grade, might be cut again.
As the effects of recession worsen, people in Spain seem to have had enough. This weekend they showed their anger. Labor union leaders aren’t calling for a general strike yet but it’s clear that Spain has once again entered choppy waters.
Most economists agree that one of the main problems for Spain is the collapse of its construction sector.
The country is now littered with places like Sesena, a Madrid suburb that resembles a real estate developer’s vision of some post-apocalyptic nightmare. The town was built on cheap credit during Spain’s boom years but the economic crisis has turned this complex of massive apartment buildings into an empty ghost town. Only 5,100 of a planned 13,000 homes have been completed, leaving families who bought apartments in Sesena with barely usable property and little chance of recouping their losses. Spain’s development ministry estimates the country boasts 687,000 unsold homes on the market—and there are no buyers in sight. “Such modern ghost towns have become a familiar part of the Spanish landscape,” writes the UK’s Daily Mail, “abandoned shells left to slowly decay.”