Spain Unemployment: At the Vortex of the Eurozone Financial Crisis

IB TIMES: Almost one-half of Spanish youth are now jobless. Is this also a post-war high?
GONZALEZ-ALANA: Yes, it's actually worse than the official statistics indicate since many young Spaniards are working part-time jobs for which they are overqualified and underpaid.

IB TIMES: Spain’s jobless rate is double that of the euro zone average as a whole. Why is this? Is it because Spain had so many workers engaged in the construction industry, which has since collapsed?
GONZALEZ-ALANA: Yes, the collapse of the construction industry is a key reason, but there are two other reasons for the unemployment rate.
First, without growth, countries that are used to borrow see borrowing costs going up as well as unemployment. Spain needs to grow its private sector.
The other reason is that firing workers is costly. Without labor reform measures that would lower barriers to hiring and firing permanent workers, employers continue seeking temporary workers who don't count as being officially employed.
Employers also complain about the many types of contracts and demand a simplification of the unwieldy hiring bureaucracy.

IB TIMES: Mariano Rajoy swept into power last year largely on hopes his Popular Party can fix the economy. He has proposed some drastic spending cuts and tax increases. Are his policies (with respect to the economy and labor reform) any different from the Socialists?
GONZALEZ-ALANA: The spending cuts proposed by Rajoy may not be fairly applied across social classes. Many Spaniards fear that the conservative party will exacerbate the problems of the middle class, by imposing higher taxes, while concurrently cutting spending on public education and health care.
It remains to be seen if the spending cuts will be enacted all across the board, especially for bureaucrats associated with established political structures.
Moreover, the judicial system also needs to prove its independence when deciding on corruption cases, both in terms of the decisions made by judges, as well as the activities of citizen panels.

IB TIMES: Do you think Rajoy will be at all successful in improving things, given that Spain is expected to slide into recession next year?
GONZALEZ-ALANA: Fortunately for Spain, Rajoy, like former Socialist Prime Minister José Luis Rodriguez Zapatero, will follow advice from the European Union (EU) and the International Monetary Fund (IFM).
In the past, Spain has suffered the consequences of bipartidism [an entrenched two-party system that dominates politics], corruption and a seeming lack of preparation/background among the top leaders.

IB TIMES: Spanish labor unions have vowed to protest the austerity measures. Are Spanish unions powerful anymore, do they have widespread support among the public?
GONZALEZ-ALANA: There is support, but the general public also understands that some reform is needed and that it is necessary for negotiations between the unions and the government.

IB TIMES: How complicit are Spanish banks in the economic crisis? Are they to blame as the banks in the U.S., Ireland, etc., have been?
GONZALEZ-ALANA: Spanish banks are much better capitalized than the "cajas" (credit unions). The problem is that just because they are based in Spain, they are charged a very high interest rate. The investments in derivatives were also not as wide as in the U.S., but they were fully invested in the real estate boom (which later crashed).

IB TIMES: An EU/IMF bailout of Spain is probably unlikely, but in the event such a thing happened, what would be the fallout for Spain and the Euro zone as whole?
GONZALEZ-ALANA: Overall, and despite the depth of the crisis and the power Germany is gaining over the euro zone, countries do need to give up some sovereign power and accept more homogeneous monetary and fiscal policies. With these reforms, the EU will be stronger and more transparent and fair.

IB TIMES: A jobless rate above 20 percent for an industrialized nation is almost unheard of -- and harkens back to Depression-type numbers from the 1930s. Do you expect extremists in Spain (both Communists and Fascists) to exploit the crisis in order to increase power and influence? Or are they too weak and disorganized to mount such a campaign?
GONZALEZ-ALANA: Extremists do not usually get more than 10 percent of the votes. If their support base increases, as is already happening in the polls and surveys of other countries, these groups could enter government through a coalition and then have control over majority votes. That could potentially be problematic.

IB TIMES: Is Spain suffering the kinds of social ills that Greece is now because of the financial crisis (i.e., higher crime rates, higher suicide rates, broken families, more emigration, etc.)? Or is the social safety net still sufficient to prevent such unfortunate incidents?

GONZALEZ-ALANA: Young Spaniards are receiving full support from their families, but there has been an increase in emigration to other European countries and also to the Middle East and some Asian countries. Emigration to North America is more difficult.
In terms of broken families, the number of divorces has actually decreased because couples cannot afford them. Weddings are simpler and there has actually been an in increase in fertility. Women in their thirties who had been postponing motherhood are using this time at home to have children.
Crime continues to be associated mostly with organized groups, and although the mental health crisis is not as critical as in Greece there is suffering.
Spain needs the euro zone to build a firewall, a big enough rescue/stability fund, and is willing to work hard for it. Once that happens and private investment grows, things will get better, but it is highly likely there is going to be a lost decade -- hopefully only one.

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