Spain's new unemployed
And worse to come
Jan 22nd 2009 | MADRID
From The Economist print edition
The worrying social fallout from sharply rising unemployment
TENS of thousands protested in Zaragoza recently. “If this isn’t fixed, strike! strike! strike!” they chanted. A city that in 2008 enjoyed the limelight of a World Expo is now one of Spain’s most troubled. The protesters show that negative indicators are more than mere numbers. In the country with Europe’s highest unemployment rate, jobs have overtaken terrorism as voters’ main concern.
In few places does the social fallout from recession look so dramatic. Predictions keep getting worse. The government expects unemployment to rise from 13% to 16% this year. The ESADE business school predicts 20%. Aragón, the region of which Zaragoza is capital, encapsulates it all. The switch from boom to bust has had a drastic effect. Spain’s decade of high growth was especially notable in Aragón, which hit near-full employment in the Expo-building frenzy. “Now we are among the regions destroying jobs fastest,” says Julián Buey, a local union leader. “That is because we created low-skilled work in construction but did not invest in technology.”
The end of the Expo and the car-making crash make things worse. Aragón’s government, desperate to save a General Motors factory and its suppliers, has offered GM a €200m ($260m) credit guarantee. It is fighting an uphill battle. Spain is leading car sales down with an annual drop in demand of almost 30%.
The pain is uneven. Immigrants and the young, many of Aragón’s new workers, were the first to be sacked. They have not built up a decent cushion of unemployment benefit. Some 5m foreigners have multiplied Spain’s immigrant population eightfold in a decade. Offering them lump-sum payments to go home has not worked. Many young people dropped out of school because jobs were plentiful, says Mr Buey. Now they are both unemployed and uneducated.
The government in Madrid predicts that GDP will contract by 1.6% this year, and the budget deficit will soar to 6% of GDP. Others are even gloomier. “We have used up all the leeway we had with public spending,” admitted Pedro Solbes, the finance minister. Standard & Poor’s decision this week to downgrade Spain’s credit rating has confirmed the worst.
The full social impact of the recession will kick in after the summer, when a first wave of jobless run out of unemployment pay and start receiving less generous welfare handouts. The Socialist government of José Luis Rodríguez Zapatero, which was re-elected in March 2008, may then feel more popular discontent. For now claims that things will be rosier at year’s end may have lulled some into a false sense of security. Spain’s strawberry farmers, in need of pickers, have gone to Morocco to hire thousands of labourers this month. Spaniards had it good for so long that many will not consider low-paid agricultural work. That may change by the time the strawberries need picking again next year.