Think Spain is speeding on its way over the proverbial cliff? Let’s emphasize the “speeding”.
Continuing on our focus today of issues within the EU, Spain — merely the 9th largest economy in the world — announced today that its unemployment rate hit 24.4%. For purposes of context, that rate stood at a relatively mild 7.9% in 2007.
OUCH…24.4% unemployment is a whole lot of pain!!!
The BBC offers further insight on this disaster in writing, Spanish Unemployment Hits 5.64 Million,
The number of unemployed people reached 5,639,500 at the end of March, with the unemployment rate hitting 24.4%, the national statistics agency said.
The figures came hours after rating agency Standard & Poor’s downgraded Spanish sovereign debt.
Official figures due out on Monday are expected to confirm that Spain has fallen back into recession.
Earlier this week, the Bank of Spain said the economy contracted by 0.4% in first three months of this year, after shrinking by 0.3% in the final quarter of last year.
Other figures released on Friday showed that Spanish retail sales were down 3.7% in March from the same point a year ago, the 21st month in row sales have fallen.
In the first three months of the year, 365,900 people in Spain lost their jobs.
The country has the highest unemployment rate in the European Union and it is expected to rise further this year.
“The figures are terrible for everyone and terrible for the government… Spain is in a crisis of huge proportions,” Foreign Minister Jose Manuel Garcia-Margallo said.
The new government has announced reforms to the labour market, including cutting back on severance pay and restricting inflation-linked salary increases, that it hopes will ease the problem.
These measures have angered unions, which have organised widespread general strikes in protest.
The government has also introduced drastic spending cuts designed to reduce its debt levels and meet deficit targets agreed with the European Union. These cuts are contributing to Spain’s economic contraction.
“In Spain today, a cycle similar to Greece is starting to develop,” said HSBC chief economist Stephen King.
“The recession is so deep that when you take one step forward on austerity, it takes you two steps back.”
Talk about a downward death spiral. There is obviously very real human pain involved in this Spanish disaster. That pain and how it is addressed financially, politically, socially, and otherwise has very real implications across the EU and the global financial landscape as a whole.