PER 2015
first half of 2012 and both Novagalicia and CatalunyaCaixa lost €1.4bn in the same period. Consequently, the Spanish government was forced to take action and so appealed to the EU for aid to repair its banking sector, and subsequently, in 2012, Spain was loaned €41.4bn by the EU. Since this loan Spain have made good progress; they have already paid back two instalments- €1.3bn in July 2014 and €1.5bn in March 2015- and are due to pay a further €2.5bn in July 2015, six months ahead of schedule. Spain are now able to do this as a result of their long overdue economic recovery after their double-dip recession; in April 2015 the IMF raised its growth forecast for Spain to 2.5% then raised it again in June 2015 to 3.1%- far ahead of the European average. This growth has been stimulated by both internal and external factors, for which the government can take some credit after the overhaul of the labour market in 2012, as the introduction of the Landmark Law meant firms can now hire and fire workers at will, creating a more flexible labour force and reducing costs of production: new workers cost €16-17 per hour, compared to previous ones who cost €22-23 per hour. These internal factors have been aided by the depreciation of the Euro and the fall in oil prices, which alone will add up to 0.5% onto Spain’s GDP. Considering the state of Spain’s banking sector before the aid was provided, economists can, and have, argued that Spain has dealt with this particular problem and the fact that they are set to grow at such a high rate suggests Spanish banks are on the road to recovery. The second main problem caused by the recession is Spain’s infamous unemployment rates. In January of 2007 Spanish unemployment was recorded at 8.2%, just above the EU average. Over the next three years it would jump up to 19.5%, and a further 7.5% to reach a record high of 27% in 2013 when the rates vied with Greece for top spot in the EU. As of the first quarter of 2015 they have fallen, but still remain extremely high at 23.8% and despite this fall, 24% of salaried workers are on temporary contracts and half of those peoples’ contracts is for six months or less. In Vallecas, Madrid, one in five people are unemployed yet do not receive unemployment benefits and, coincidentally, Prime Minister Mariano Rajoy’s party has lost over half its support since gaining an absolute majority in 2011. According to Eurostat figures, the five regions with the worst unemployment rates are all in Spain and Southern Andalucía, Spain’s most populous area, heads that list at an extraordinary 35%. Six million jobs were lost between 2007 and 2012 and up until 2012 the unemployment rate for under-25s was a whopping 57%. As if these figures weren’t already bad enough, the majority of young people are leaving these heavily affected regions and Spain as a whole, which is shrinking the labour force and thus makes the data even more striking. To try to combat these fundamental problems, the government implemented numerous labour reforms such as giving companies more power to set wages and working conditions and cutting severance packages. Hence, the wage growth that had previously far outweighed gains in productivity was significantly slowed and there is now a far better balance between the two. These reforms produced more positive results; between August 2013 and 2014 190,000 jobs were created, unemployment fell by 2%, and the labour force finally stopped shrinking after six straight quarters of decline. Moreover, Spain’s projected growth, as of April 2015, is 3.1%, a far higher rate than the European average. Despite this high projected growth, the IMF says that if the Spanish government fails to make further changes, the country’s unemployment rate will not fall below 20% before 2019. To solve this particular problem the state must deal with Spain’s structural unemployment rate- the level reached when a country is working at full capacity-, which is 18%, triple that of the USA. The Socialists, the other dominant part in Spain and the PP’s competition- much like the Conservatives and Labour here in the UK- argue that as well as the inadequate fall in unemployment, Rajoy has failed to improve employability; Spain has one of the highest school dropout rates in the OECD, and
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