Spain’s unemployment rate continues to rise without a break. The Instituto Nacional de Estadística (National Statistics Institute) reported that in the second quarter unemployment rose to just over 24.6%, up from 24.4% in the first quarter. Some 5.69 million people were out of work during the period.
The news reinforces the belief that Spain cannot emerge from what has become a national depression via internal growth coupled with austerity. Without stimulus measures, and some relief from budget standards set too high as a means to get Spain bailout money, the nation will spiral down to a more desperate economic situation, one that will not be resolved for years.
News from other nations around the eurozone paints a similar picture, although not as bad. Even the United Kingdom recently has suffered from an expanding recession and unemployment. Germany too has begun to feel the drag of the region’s trouble.
Spain’s problems are particularly vexing because there are three of them. One is the collapse of the nation’s banks, caused largely by the bursting of a real estate bubble. Another is the dire financial situation of many of Spain’s states. The last problem is a drop in tax receipts at the federal level, married with years of costly entitlement programs. That Spain’s neighbors and the International Monetary Fund think these troubles can be solved with more austerity is mind-boggling.
Spain is a reasonable litmus test for how Europe can solve the problems of its most damaged economies. Greece is not. The Greek budget and debt situation could well be beyond salvaging. The problems are that severe in Greece. Some argue that a new sovereign default and Greek exit from the alliance could be survived by the region’s banks. Spain is too large an economy for that to hold true.
If Europe wants to see whether measures other than austerity can improve a nation’s economic and financial situation, Spain is the perfect Petri dish. However, the chance to test the stimulus theory may have come and gone. Spain’s troubles are that deep.
Douglas A. McIntyre
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