Spain's record jobless rate sparks debate on policies
Source: Agencies |
April 26, 2013, Friday
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Print Edition
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UNEMPLOYMENT in Spain jumped to a record 27.2 percent, data showed yesterday, fuelling a European debate over whether to ditch austerity policies and switch to reviving economic growth.
More than 6 million Spaniards were out of work in the first three months of this year, raising the rate in the eurozone's fourth biggest economy to a level unseen since records began in the 1970s.
Joblessness has grown for seven quarters in a row, leaving more Spaniards without work than the entire population of Denmark, and the percentage rate now matches that of Greece, which is in a full-blown depression.
Spain has slipped in and out of recession for the past five years. In the first quarter more businesses and individuals went into bankruptcy and default, driving up bad loan rates in Spain's troubled banks and hitting profits at three of its top five lenders, Santander, Caixabank and Sabadell.
The grim economic picture contrasts sharply with financial markets. There, waves of liquidity from around the globe have brought down Spain's borrowing costs and all but banished last year's fears that a budget crisis would force Madrid to seek a international sovereign bailout.
"These figures are worse than expected and highlight the serious situation of the Spanish economy as well as the shocking decoupling between the real and the financial economy," Jose Luis Martinez, a strategist at Citi in Madrid, said.
On the markets, yields on Spain's 10-year bond fell this week to their lowest level since late 2010.
Prime Minister Mariano Rajoy imposed drastic spending cuts and tax rises last year, trying to bring a huge budget gap under control, in line with the eurozone's policy of fighting its debt crisis with austerity. But the belt-tightening has aggravated the Spanish economy's problems.
With the entire eurozone heading into a second year of recession, top European Union economics official Olli Rehn and his boss European Commission President Jose Manuel Barroso have begun to push for more flexibility on public deficits.
Others, including the European Central Bank, disagree, saying easing up on austerity would not mean economic recovery.
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