Friday, September 05, 2008

Hard Times, And It's Going To Get Worse

The unemployment figures for August have shown a sharp increase in the total. It's normal for unemployment in Spain to increase in August as seasonal work starts to dry up, but the increase this year has been way above the average and the total of those out of work has topped 2.5 million for the first time in 10 years. That's not the end of it, the figure to watch out for will be that for next January which is seen as something of a peak month even when the economy is expanding.

The government chose this moment to mix immigration into the economic debate, with a decision to stop employers in Spain contracting labour from overseas. The decision was soon modified as it was pointed out that the only people queuing up to pick next year's strawberry crop were going to be immigrants. This highlights a significant detail concerning unemployment in Spain, if you look at the figure for the boom years since the late 1990's you will see that once the total got down to around 2 million it didn't change very much at all even though the economy was growing rapidly. The reason in the end why there are so many immigrants working in Spain is because they are doing jobs that Spaniards don't want to do. This makes it all the more depressing that the government should try and suggest that immigration is the problem.

The Partido Popular are of course delighted that the government has raised the issue of immigration, they see it as a vindication of their opportunistic attempts to use the issue in the general election campaign. Meanwhile, PP leader Mariano Rajoy has been invited to spell out his solutions to the country's economic troubles, and a fairly uninspiring set of proposals it is. Whilst most economists would probably argue that the state running a deficit in difficult times is normal, the PP focus their attack on government spending at the same time as they argue for tax cuts. Rajoy and his team crucially always dodge the question of what spending they will cut to pay for these tax cuts. The main tax they want to reduce is the Impuesto de Sociedades (on company profits), a tax which is already contributing significantly less this year to government coffers and which has been significantly reduced anyway in the last few years.

The PP have preached austerity but so far there is little sign of them practicing it in areas where they govern. The PSOE have made a smart move to highlight this by calling on all of their mayors around the country to take the lead with a bit of belt tightening. The problem is that municipal financing is in even more of a mess than that of the autonomous regions. With the housing boom over, a key source of revenue has disappeared overnight for many municipalities, and mayors of the larger cities are now uniting to try and get more money from the government. One PP mayor who certainly isn't interested in austerity programmes is Madrid's Alberto Ruiz Gallardón, a man with Olympian ambitions who refuses to see his dreams knocked off course by such trivial details as a global economic crisis.

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