Despite fears over a Spanish collapse abating in the eurozone, the country is certainly not out of the doldrums yet. The level of unemployment in Spain is still leaving a question mark over its ability to recover from recession and the property market is continuing its descent. So is there light at the end of the tunnel and will the grip of unemployment relinquish its hold any time soon?
Recent figures leave us anything but optimistic on this point. During the first three months of the year, more than six million Spaniards were out of work. The jobless rate now stands at 27.2 per cent – the highest level since records began in the 1970s. As the fourth biggest economy in the eurozone, this is worrying not just for Spain but the EU at large.
Many are blaming the continued crisis on Madrid’s severe spending cuts, which were made to help increase investor confidence in the country. However, Spain has been plunged into deep recession and unemployment has been rising for seven consecutive quarters.There will no doubt be considerable debate as to whether easing off budget austerity could help to turn fortunes around.
Speaking about the recent findings, strategist at Citi in Madrid Jose Luis Martinez said: “These figures are worse than expected and highlight the serious situation of the Spanish economy as well as the shocking decoupling between the real and the financial economy.”
The collapse of the property market has done little to help the situation and since the boom ended millions in the construction sector have found themselves out of work. However, until unemployment levels improve, demand for Spanish real estate will remain relatively subdued. While foreign interest remains buoyant, it cannot reinvigorate the sector single handedly – domestic activity must return.
Nevertheless, there are indications that Spain will eventually see an end to recession. The country is performing well in the export market and the International Monetary Fund has said the country’s financial restructuring is on track. Prime Minister Mariano Rajoy is confident that Spain will begin to recover in 2014 and has faith in his government’s labour reforms, which are designed to help address unemployment.