Wednesday, January 02, 2013

The Pain in Spain

Unemployment in Spain already stands at 26%.  Fewer than half of those aged under 25 find work.  Average household disposable income has already dropped, in real terms, by almost 10% since 2008.  In poorer regions such as the Canary Islands, Andalucia and Extremadura, almost a third of the population is below the at-risk-of-poverty line. There are now 1.7 million Spanish households in which not a single family member still earns a salary. Nearly 4 million people have lost their jobs since late 2007, when the real estate bubble burst. More than half of those out of work in Spain are now considered to be long-term unemployed. Last year, some 800,000 people lost their jobs. In 2013, unemployment will rise further as another half a million or more jobs are lost. A new labour law offers workers in companies with falling revenues either wage cuts, sackings or both.

And house prices will continue to tumble in a country where 80% own their homes. Prices dropped 15% last year – the biggest fall since a housing bubble burst in 2008. Some 400,000 eviction proceedings have been opened in Spain since 2007, with roughly half of the families involved having already lost residential properties due to foreclosures.  During the first six months of this year alone, the Consejo General del Poder Judicial, which oversees and organizes the Spanish judiciary, registered 94,502 repossessions -- and the evictions reached a record 532 a day during the first half of 2012. According to a forecast by the Spanish central bank, the number of foreclosures will increase by another 30 percent in the coming year. The outlook for 2013 is grim.

Currently, 12.7 million people are already forced to survive on less than 60 percent of the average Spanish income, meaning that 27 percent of the population is living below the poverty threshold. Oxfam says by 2022, some 18 million Spaniards, or 38% of the population, could be in poverty.

 "We can only get out of this crisis by working more and, unfortunately, earning less,"
said former employers' federation leader Gerardo Díaz Ferrán two years ago. He was not, of course, talking about himself. Díaz Ferrán's own companies have since gone bust and the workers sacked. State prosecutors claim Díaz Ferrán stole money from his companies first – ensuring himself a high-end lifestyle that included a Rolls-Royce and two luxury apartments overlooking New York's Central Park.

With its high jobless rate the Spanish labor market is inviting for some. Spain’s unit labor costs — a measure of productivity — are down 4 percent since 2008, according to Eurostat, the European statistics agency. Car workers are an estimated 40 percent less expensive than those of Europe’s other biggest car-making countries. Ford and Renault recently announced plans to expand their production in Spain. Other carmakers have also committed this year to new plants or expansion. Carmakers have added a dozen models to their Spanish production over the last two years.

Spain’s average hourly labor cost at 20.60 euros which was well below Germany’s 30.10 euros and France’s 34.20 euros. car manufacturing in Spain has no collective bargaining agreement with unions. As a result, each car-maker has been able to adjust working hours with its own employees.  Since the start of the crisis in 2008, car factories have cut their work force by about 9 percent, compared with 21 percent for Spanish industry as a whole.

 Opel, a subsidiary of General Motors, confirmed it would close its plant in Bochum, Germany, in 2016. Peugeot Citroën is closing its factory in Aulnay-sous-Bois, near Paris, in 2014. Ford'S reorganization plan involves closing factories in Britain and Belgium. Ford is hoping to close the Belgian plant by the end of 2014, with the loss of about 4,300 jobs, and transfer much of the work to Valencia in Spain.

 But Spanish car sales have slumped this year to an estimated 700,000 vehicles, a level of 25 years ago. With the country expected to stay in recession through the end of 2013, no quick upturn in sales is expected. Exports now represent 90 percent of Spain’s car production

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