A world in economic crisis

If Spain falls…..

Posted in Spain, stagflation by Aussie on May 21, 2011

If Spain falls and ends up needing a financial bailout, then it will be the fault of Zapatero. As explained in the past, Spain had a booming economy, but when Spain joined the eurozone, the government took advantage of euro loans in order to do things like building bridges. However, for Spain it is not that simple. One question that needs to be addressed is why there is a 45% unemployment rate for Spanish youth.

More than 25,000 people defied a ban on a protest rally to voice their dissatisfaction with the Spanish government, but this dissatisfaction is with the introduced austerity measures that in reality are trying to correct the financial debt crisis in Spain. These people do not want to see an end to the welfare state, they want it to continue.


The protest began six days ago in Madrid’s Puerta del Sol as a spontaneous sit-in by young Spaniards frustrated at 45% youth unemployment.

The crowd has grown to some 25,000 in the capital and has spread to cities across the country. Hundreds have camped out each night in Madrid.

They are demanding jobs, better living standards, a fairer system of democracy and changes to the Socialist government’s austerity plans.

“They want to leave us without public health, without public education, half of our youth is unemployed, they have risen the age of our retirement as well,” said protester Natividad Garcia.

“This is an absolute attack on what little state welfare we had.”

Spain’s 21.3% unemployment rate is the highest in the EU – a record 4.9 million are jobless, many of them young people.

What these people do not seem to understand is that the social welfare system needs to be reformed or they will end up with nothing at all.  There are a few things in this report that is cause for alarm:

1. the very high unemployment rate. At 21% this is alarmingly high (maybe the govt needs to use some of that US and Australian ingenuity that hides the real rate of unemployment). The high rate is one of those factors that indicates an economy has hit stagflation.

2. When health and education are totally free, and there is a decrease in taxation receipts or an increase in the demand for those services due to an increase in illegal immigration where there is no subsequent increase in taxes, then something has to give, and reforms are necessary. My view is that people should pay in something towards the education of their children unless they are so poor that they simply cannot pay fees. In other words people who are employed should pay something. If the healthy system is being strained then there most definitely needs to be an overhaul – perhaps those who can afford it, should be paying for private health insurance, thus taking some of the strain off the stystem. An alternative is to send the illegal immigrants back to Morocco where they belong.

I am indeed sympathetic to the unemployed. I have been in that position of graduating to find that there were no jobs available. I can understand that form of frustration, and my sympathy is with those in that unenviable position. However, they too need to think outside the box in order to obtain employment in the future. They cannot just sit and whinge about being unemployed.

The Spanish government would have been better off not wasting money on building wind farms, because these wind turbines have not created employment opportunities, but they have put people out of work. At the same time the government must service the debt created from going ahead with a form of energy creation that is both expensive and inefficient.

If the Spanish can get their act together and think outside the box, then perhaps they can manage to not fall like Portugal, Ireland and Greece. The austerity measures are necessary, but they probably need to make that big decision and abandon the costly wind energy farms.



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