The financial rescue request for Spain’s banks has been rubber stamped. But we will not know the full details of the bailout until next month’s Eurogroup meeting.
At this week’s EU summit, recommendations from Brussels could become obligations. That might mean anything from Spain being forced to raise taxes, to delaying the retirement age, or making even further cuts to salaries in the public sector. More sacrifices despite two years of austerity in a country with six million unemployed.
For more on Spain, we spoke to Daniel Gros, Director of the Centre for European Policy studies in Brussels. To see the full interview, click on the video link above.
Spain wants inspiration badly
Spain wants to stop the spiralling of its debt pile amid an alarming recession, to clean up its fragile banking system, and to keep its autonomous regions from overspending.
Even cabinet members in Madrid have admitted the proportion of their recession and their role at the centre of a spreading euro zone crisis are immense.
Years of growth led by building construction provided many millions of jobs. When the world financial crisis of 2008 struck, the property boom was driving huge house price increases and growing household indebtedness. When the bubble burst, and the economy’s main engine was lost, soon people could not pay their mortgages.
Now Spain’s unemployment rate is Europe’s highest, at around 23 percent – or 50 percent for younger Spaniards.
The lack of jobs forces inertia on them: no career is possible, starting a family is put on hold, there is no chance to invest in a house or build for the future.
The banks are a sort of no-man’s-land, especially in regions where they put all their investment eggs in the construction basket.
Needing cash to stay afloat, they threaten to suck state finances further into the red.
Spain’s national debt was among the lowest before the financial crisis and then the euro zone debt crisis ploughed over the horizon – some 36% in 2008 – then it doubled.
The national productivity rate has been a steadily soft performer.
It has only risen by 0.89% in ten years, while salaries have risen by 29%.
At the same time, labour costs for employers are among the highest in Europe.
The sum total makes for thirtieth place in the world in terms of competitiveness.
Finding a economic activity with the potential to rekindle growth is tough. The automotive sector that led exports soon ran into trouble.
Textiles hold out some hope. Since 2010 this has seen an 8.7% rise in productivity and 14% more exports.
Tourism only represents 10% of its income, even though it is a key earner.
Spain wants inspiration urgently on how to prevent its recession from getting even worse.
Seaside fun may be on the wish list but not on the priority list.