Can we really speak of an economic “miracle” in Spain?

THE ECO SCAN – The Spaniards voted this Sunday for the regional and municipal elections. The country has just gone through seven years of difficulties and if the GDP goes up, the unemployment rate is still 23.8%! Public accounts, salaries, trade… Spain is not yet out of the woods.

The Spaniards went to the polls this Sunday for the regional and municipal elections. An important election as the has just gone through several extremely difficult years, with a real estate crisis (early 2008), a financial crisis (autumn 2008) and a serious banking crisis (until 2012), which were followed by a huge European aid plan and a severe austerity cure (in 2012). While the current, conservative government is clinging to positive signs of recovery in Spain, the country is not yet out of the woods. Update on the state of economic health of our European neighbor.

• Growth is finally back on track

The GDP is the first indicator used to take the pulse of an economy: let’s take stock of the evolution of growth in Spain. The European Commission forecasts growth of 2.8% for 2015, after 2014 up by 1.4%, and four years of great difficulty.

At the start of 2008, the real estate bubble that started in 1999 exploded, weakening the banking and financial sectors. From the third quarter, the country plunged into recession and into the infernal spiral of public spending to save the banks.

But, for Spain as for France, the good figures anticipated by the European Commission were notably boosted by external factors: the fall of the euro which favors exports, the fall in oil which softens the overall energy bill ( households and businesses), and low borrowing rates for the government (between 0 and 1.2% depending on the maturity of government bonds).

Despite everything, the Minister of the Economy,, is confident for the next five years and expects growth rates of between 2.5 and 3%.

• But Spain has still not regained its pre-crisis levels

Behind the GDP growth, we must also look at the figures in value. In billions of euros, the wealth created in Spain in 2014 has not returned to its pre-crisis levels: in 2014, the Spanish GDP reached 1058 billion euros, against more than 1100 billion in 2008. The country will only return to this level in 2017, if the forecasts hold up until then.

Debt exceeded 1 trillion euros mark in 2014

, which represents 97.7% of the country’s GDP, according to the latest data released by the Bank of Spain. The current Conservative government expects the symbolic 100% of GDP mark to be reached in 2015. Debt is expected to continue to climb in 2016, before falling in 2017.

Spain’s public debt, which was only 36.3% in 2007, exploded with the crisis, suddenly weighed down by the rescue of its banks in 2012.

By comparison, in France, public debt exceeded 2 trillion euros at the end of 2014, at 95.2% of GDP.

• The public deficit widened further in 2014

Spain recorded a public deficit of 5.7% of GDP in 2014, against 5.5% forecast by the government. However, this remains better than the 5.8% that Madrid was ahead of Europe not to exceed. If it is in clear decline, the deficit still largely exceeds the famous 3% “authorized” in normal times by the European Union. Note that two years earlier, public spending reached over 10% of GDP. The austerity cure, which in particular has cut the numbers and salaries of civil servants and pushed back the retirement age (from 65 to 67), works from the point of view of public expenditure.

• A falling unemployment rate, but still reaching… 23.8% of the working population!

The evolution of the unemployment rate is a witness to the crisis that Spain is going through: at the end of 2007, the unemployment rate reached 7.9% of the working population (which is already a fairly high rate for a period of full growth. ). From 2009, a few months after the start of the crisis, it had climbed to 18.9%, not to stop rising until 2013, when it reached almost 27%! Unemployment has declined since, of course, but after such a high level it remains at 23.8%.

Refocusing our attention on young people, the numbers are startling. More than half (55%) of young workers under 25 are unemployed! As for long-term unemployment (unemployed for more than a year, the rate reaches 60%). “The public assistance services do not have enough resources for job search assistance, personalized follow-up, guidance”, noted last year.

• Reinvigorated foreign trade …

In exchange for the European aid plan of 100 billion euros in 2012, Spain had to undergo a severe austerity cure. Objective: to lower the cost of labor to restore the health of businesses and boost growth, and therefore employment. From 2012, with the first labor reform, layoffs became cheaper, partial unemployment became possible, wages were lowered, holidays reduced, etc. As a result, Spain exports more and has managed to reduce its trade deficit (difference between exports and imports). Symbol of the Spanish revival, its doped automobile industry.

The Spanish employee unions, determined to take advantage of the recovery, now want to obtain a 1.5% increase in wages in 2015. As a reminder, the minimum wage in Spain is 756.70 euros per month.

•… at the cost of precariousness and polarization

One figure is enough to understand: 90% of contracts signed in March are fixed-term, half less than 3 months. With an increasingly low-cost labor market, Spain must also manage an active population where there are many low-skilled people (more than the European average) but also a large share of qualified (or even very qualified) people. In Spain many young people who have studied for a long time have to accept jobs well below their qualifications.

• An indicator of well-being lower than the average for OECD countries

In general, Spaniards are less satisfied with their lives than most citizens of developed countries. A finding noted by the,: “Spain is positioned below the average in the themes of the quality of the environment, employment and wages and education and skills”.