Spain’s unemployment rate hit a record high of 25%, a level not seen since its dictator days, and coming austerity cutbacks are expected to drive the rate even higher in the year to come.
Reuters reported Friday that according to the National Statistics Institute, unemployment reached 25% in the third quarter, up from 24.6% in Q2. The employment situation in the country hasn’t been that bad since at least 1976, when Gen. Francisco Franco died and the Spanish dictatorship came to an end. Still, as bad as it is, with 5.8 million workers idled, the 25% figure is a shade less than predicted by economists, who had pegged it at 25.1%.
However, that is no consolation to the unemployed. Labor unions in Spain have called for a general strike on Nov. 14, believing that austerity measures enforced so far have done nothing to better Spain’s plight but only harmed its people.
Economists believe that additional cutbacks still to be implemented will worsen the situation, since they will further hamper growth and likely throw even more people out of work.
Bloomberg reported that Economy Minister Luis de Guindos said that the recent improvement in yields on Spanish bonds, after a European Central Bank (ECB) offer to purchase unlimited debt and despite a forecast of continued contraction of the Spanish economy, indicates that investors are more concerned with the future of the euro than they are with Spain’s domestic issues.
He was quoted saying, “That is because the government is doing what it has to do and because we are all acting to dissipate doubts on the euro’s future.”
Still, all is not well in Spain, particularly for the unemployed. Ricardo Santos, an economist at BNP Paribas in London, said in the report, “The situation is serious. There is still room for a deterioration in unemployment. Activity is weak and the government will reduce jobs as there are strict targets to adjust the number of public-sector temporary workers, especially in health and education.”
Justin Knight, a European rate strategist at UBS in London, pointed out in the report that “Unemployment is one part of a multifaceted problem in Spain. The recession is looking very bad and it looks like it will be worse than forecast. This is a Spanish problem as much as it is a problem of the euro; Spain’s public- and private-sector net external debt is the same size as Greece’s.”