Spain’s Unemployment Rate at 21.5% as Europe Flounders

Spain’s unemployment rate reached 21.5% in the third quarter. It is an example of the huge barriers economies in the region face. These barriers make the chances of balancing nations’ budgets nearly impossible. That, in turn, means bailouts of financially weakened southern European nations will last only so long.

Spain must increase the size of its austerity plan, according to EU officials and proponents of the theory that countries can cut their way to lower deficits. The same austerity supporters believe that drops in government expenditures are at the heart of deficit reductions in Greece and Italy as well. These opinions do not take into account the lack of solid programs to increase employment in these countries. In most nations, adding jobs always requires the national government to provide incentives to businesses to add workers. Austerity takes away any chance such programs will exist.

What is worse about Spain’s jobless numbers is that unemployment among the young is closer to 40%. That means there will be a generation with a standard of living well below that in Spain a generation ago. As these young people age, they will have little job experience. Whatever education they have and whatever skills they have acquired will be nearly lost. Spain has an employment and consumer spending problem now. It will be worse as young people who have had no chance to create wealth finally move into the work force.

The unemployment problems in Italy and Greece are not as great as in Spain. That could change rapidly as social programs are cut or limited as part of austerity programs. A recovery in the region can never take hold while unemployment rates in the weakest economies are well into the double digits. That is unless the nature of recessions and recoveries have changed completely for the first time in memory. And economies without jobs cannot generate enough capital to cover their sovereign debt obligations, which grow by the day.

Douglas A. McIntyre