By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from http://www.macrobusiness.com.au/2013/01/imf-admits-more-mistakes/“>MacroBusiness.
Another day, another round of atrocious data out of the Eurozone:
Spain’s unemployment rate soared to a new record of 27.2% of the workforce in the first quarter of 2013, according to official figures. The total number of unemployed people in Spain has now passed the six million figure, although the rate of the increase has slowed.
The figures underline Spain’s struggle to emerge from an economic crisis which began five years ago. A big demonstration in Madrid is being planned against the austerity measures. On Friday, Prime Minister Mariano Rajoy will unveil fiscal and policy measures aimed at halting recession in the eurozone’s fourth-largest economy.
“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,” said Jose Luis Martinez, strategist at Citi.
Last week, the International Monetary Fund cut its 2013 forecast for Spain’s growth to a 1.6% contraction from 1.5% and said the unemployment rate would peak at 27% this year.
Youth unemployment is reported at 57.2%, which is a number so large its almost impossible to comprehend. The IMF claims it will peak this year, but you only have to look at their track record on economic forecasting to know you should take that with a pinch of salt. The latest PMIs still show contraction, industrial production is down 6.5% from a year ago, and bad loans are still over 10% even after the implementation of a bad bank in an attempt to clean out the banking system.
With dour data like that it is little wonder that Spain is ahead of the pack when it comes to lack of confidence in the EU:
Public confidence in the European Union has fallen to historically low levels in the six biggest EU countries, raising fundamental questions about its democratic legitimacy more than three years into the union’s worst ever crisis, new data shows.
After financial, currency and debt crises, wrenching budget and spending cuts, rich nations’ bailouts of the poor, and surrenders of sovereign powers over policymaking to international technocrats, Euroscepticism is soaring to a degree that is likely to feed populist anti-EU politics and frustrate European leaders’ efforts to arrest the collapse in support for their project.
Figures from Eurobarometer, the EU’s polling organisation, analysed by the European Council on Foreign Relations (ECFR), a thinktank, show a vertiginous decline in trust in the EU in countries such as Spain, Germany and Italy that are historically very pro-European.
….
In Spain, trust in the EU fell from 65% to 20% over the five-year period while mistrust soared to 72% from 23%.
And with Spanish house prices accelerating downwards last month according to Tinsa, and the corresponding loss in private sector wealth it really isn’t a surprise that employment continues to fall while anger levels rise.
But as we know, a rise in unemployment means a fall in government revenues which, under the current line of thinking, again means a call for greater public sector cuts and around the mad merry-go-round goes. Over the last few years we’ve seen this picture play out in the European periphery but as I’ve been warning for over 18 months both France and The Netherlands are ‘core’ economies that are highly susceptible to go the way of the periphery due to the macroeconomic structure of their economies.
Unsurprisingly in the last few weeks both countries have acknowledged that they will miss their 3 percent deficit targets this year, while we’ve already seen a number of other countries receive concessions on their existing bailout programs due to worse than “expected” economic metrics.
Earlier this week the European Commission President, Jose Manuel Barroso, stated that there were signs that the current policy framework was reaching its political limits suggesting that it has now become evident, even to the Eurocrats in Brussels, that the austerity experiment is failing.
So as I said back in December of 2011:
My assumption is that, if Europe does ratify this framework …, after 12-24 months of trying the effect will be so disastrous that they will eventually give up. But until then my base case for Europe is a significantly worse economic outcome.
We’re not there yet, but I’ve still got another 8 months under my belt.
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I find myself wondering when the dam will burst…
Spatial heterogeneities are always very important to consider, in this case it sheds light on the causes of economic disruption.
Spain’s industrial and technological north is doing relatively well.
The rather small and northern Euskadi, the land of the Basques, has an overall unemployment rate of 17% whereas the large and southern Andalucia has a rate of 37%. The European level should be currently close to 13% (it was 12% in November).
Similarly, the total number of corruption cases directly involving public institutions such as parties and government offices, that are seen in the lower courts, is 44 per million people in the southern half of Spain, and is only 20 per million people in the northern half, with a minimum again in Euskadi at only 3 cases per million people.
Euskadi is also the region of Spain where the rate of investment in science and technology is the highest in Spain (close to the European mean, IIRC), and where the salaries are the highest for all kinds of jobs.
Euskadi also is the land of cooperative companies such as Mondragon, and its right-wing party, currently in power, woukld be considered as borderline Marxist in the USA.
for those not familiar with Mondragon:
https://www.youtube.com/watch?v=7efaDeFmurQ
the documentary is a bit dry and from 1980 but gets the point across.
The Basque Country (i.e. what you probably mean by “Spain’s industrial and technological North”) is not well at all. Local media reported yesterday figures of almost 20% unemployment for three of the four provinces, with only Gipuzkoa (ruled by the Left) staying in the very relatively “safe zone” of 13% unemployment. Biscay: 18%, Araba: 16% (slight improvement) and Navarre: 19%. I know that this is almost “good” compared with Andalusian ~40% unemployment but it is still extremely painful – and bad for the economy overall because local demand (which is central) is shrinking quickly.
The reason is that companies, especially in the economical backbone of light industry, have been closing one after the other, mostly for lack of demand (or too often also quite capriciously favored by the new EU-demanded “liberalization of labor markets”, that allows for too-cheap closures of even profitable business).
I’ve heard they need qualified workers in Brazil…
Brazil is much further along the learning curve than Spain when it comes to knowing about the ravages of neoliberalism.
But Spain too will learn, eventually.
Euskadi overall is just 3 points of unemployment over the European mean, so it is doing relatively well. The corruption index I computed is also very informative.
You say companies are closing in Euskadi. How many? At what rate? Is it anecdotical? Numbers please.
You seem to imply solid businesses are closing caprociuosly because it is cheaper to lay off workers because of Europe? What? Sorry but sounds like whining for the sake of whining.
The situation is bad in Spain, very bad, but with a systematic geographic pattern and with pockets that are holding on relatively well, namely Euskadi, because they have been consistent in their efforts to keep and build industries, support science and technology. That should be remarked, highlighted, and praised.
The businessmen syndicate CONFEBASK says: 2100 companies closed down only 2012 (and only the Western Basque Country, i.e. Navarre excluded): http://www.eitb.com/es/noticias/economia/crisis-economica/detalle/1233176/cierre-empresas-euskadi–confebask-dice-cerrar-2100-empresas/
They blame lack of credit (i.e. financial strangling) and forecast an “equally bad” year for 2013.
This data does not include loss of jobs for other reasons, as most companies are struggling and the new laws allow for even easier dismissal of “unnecesary” workers.
Another article: http://www.deia.com/2012/11/17/economia/el-cierre-de-empresas-se-relanza-en-la-cav
The Western Basque Country (CAV) is the region of Spain that has decreased the most in new business creation and is above average in company dissolution.
Another article: http://www.elmundo.es/elmundo/2013/01/28/paisvasco/1359390987.html
539 transport companies closed down in 2012 (more than half only in the last quarter), the number of working transport vehicles declined in almost 2000 (~10%).
“Euskadi overall is just 3 points of unemployment over the European mean, so it is doing relatively well”.
We are (or used to be) well above the European mean in most aspects: http://forwhatwearetheywillbe.blogspot.com.es/2012/04/socio-economical-situation-of-southern.html
Are you implying that the EU’s (“European” is a confusing label) average unemployment rate is 12.5%? Because the Western Basque Country was 15.5% in October last year (http://www.deia.com/2012/10/27/economia/-y-la-cav-llega-al-155-de-paro – now it’s even worse) and growing at double rates than Spain overall. The destruction of the industrial-technological fabric has been extreme in the last months and years and looks like worsening in a catastrophic spiral, as the bulk of the demand is always necessarily local, even if exports are also relevant.
“You seem to imply solid businesses are closing caprociuosly because it is cheaper to lay off workers because of Europe?”
It’s quite clear: the new laws promoted by Merkel and Rajoy are easying layouts and delocalization to cheaper areas like Bangladesh, Morocco or whatever, while making almost impossible to get financial support of any sort, be it private (banks are too busy capitalizing themselves under new standards, while public banking has been declared illegal) or public (strangling of budget by draconian EU rules).
“The situation is bad in Spain, very bad, but with a systematic geographic pattern and with pockets that are holding on relatively well, namely Euskadi”…
The “pocket” is collapsing as well: we live in an interconnected world and the Basque Country largely depends on Spanish economy, as well as that of the rest of Europe, and all of it is collapsing, so we won’t be an exception, sadly enough.
But it does sell unemployment .
Lidl and Aldi stores are popping up like mushrooms in Ireland destroying market town and small city high streets.
These guys require low labour costs via suppression of the money supply.
Of course this destroys far more jobs on the high street then the skeleton crew employed within their grey soviet like stores.
The Main streets in towns such as Skibbereen and Bandon are now dead zones outside of special events.
http://www.youtube.com/watch?v=Bjy-4iroEok
Have a nice day you dumb fucks …………blandville has come to Ireland
A country totally destroyed by corporate power aided by money powers dark arts which pumps and dumps people into infinite shapes and sizes (all square of course)
Add in the health & safety fascists for the added dose of bollocks and you can have a TOTAL CONTROL OF ALL SYSTEMS.
Canada started down this route 20 years ago. Downtowns like Brantford, Ontario were infamous for being ghost towns.
Well, it started in the US 50 years ago. Canada is lucky to be 30 years behind the times, but of course the future will accelerate and unfortunately in 5 to 10 years, Canada will be fully caught up.
Less revenue means smaller government, which might be a vicious circle leading to no government. Perhaps a natural economic sign that governments had become too big? Of course governments will not allow themselves to be reduced to nothing regardless of how far their revenues fall. On the bright side, seeing the governments we now produce, their abolition might be a good thing in the long term.
We had two decades of record growth with no production and no savings(the two engines for legitimate growth). Isn’t it time to be mature about things and face the fact we now must pay for such excess? Yes we’ve got criminals running things, still blundering society like Attila the Hun, but that is a separate issue. Seeing that in superficially normal times we did nothing about these criminals, except grant them unlimited powers, we now get to see if we’ll deal with them when motivated by an economic collapse.
Of course austerity doesn’t work. We’ve created an economy that cannot be fixed so nothing is going to work. Certainly Keynesian practices won’t work either. We have the Keynesians to thank for this mess in the first place!
Blaming Keynesians, I don’t think so. Keynesians haven’t been welcomed into the economic policy debate tent since the 60’s. I would blame the Chicago school monetarists for justifying the advent of neo-liberal economic policies in the first place.
Paul W says:
When I read Alice in Wonderland fantasies like yours, I’m always compelled to ask myself: “What frigging planet do you live on?”
Neoliberalism isn’t about small government or a weak state. It is about big government and a strong state, but big government and a strong state that serve only the interests of the transnational capitalist class.
Spain provides the perfect example, but I suppose in your fact-free universe, that thought never crosses your mind:
Here’s a graph of Spain’s public debt as a percentage of GDP from 2004 to 2011:
One feels sympathy for the Spanish. If memory serves, they are in debt to bail out banks that lent money (borrowed from German banks – hence Merkel’s concern) to bankers from the City of London for summer homes in the south of Spain. Now all the young men employed to build those vacation homes are on the street. Something similar happened to the Irish.
The banks could have been allowed to fail and default on their loans to the Germans but not in this neoliberal world. Now it is the state that must default and ,if I was an unemployed 25 year old in Spain, I would be demanding default and back to the Peso.
Jim
Paul W says:
Again, a dogmatic statement of fact completely divorced from real-world experience.
Argentina offers quite the counterfacutal to your defactualized assertion.
Since Argentina defaulted on its debt back in 2002, inflation has been quite high by many standards. The yearly clip has varied between 6.1% and 41%. But in spite of this, GDP growth has been robust, around 9% per year except in the depths of the GFC, when in 2008 to 2010 it registered 6.8%, 0.9% and 7.5%. In 2011 it rebounded to 8.9%.
The population below the poverty line has fallen from 37% in 2001 while under the old neoliberal regime, to 30% in 2012 under the new anti-neoliberal regime.
The unemployment rate has dropped from 25% in 2001 to 7.2% in 2011.
Industrial production growth has also been robust, racking up health gains between 4.3% and 16.2% every year except 2009, when it fell 1.2%.
And perhaps just as important, none of this is being financed by foreign hot money. Externnal debt has fallen from $155 billion in 2003 to $136.8 billion in 2012. From 2004 to 2011 Argentina ran a positive current account balance.
Here are the charts:
Argentina has had an amazing run, brought about by defying the neoliberal juggernaut. “The government shuns orthodox policies and spends heavily to stoke swift economic growth,” Reuters reports.
It’s of course unclear whether it can keep it up, for no one can predict the future, even though the neoliberal harbingers of doom are convinced they have a crystal ball. Neoliberals are not known for their modesty, and always assert their speculations as sure truth. But I think actual past performance speaks louder than mere speculation. As Jose Ignacio De Mendiguren, head of the Argentine Industrial Union (UIA), put it: “Our main concern is competitiveness. People know devaluing (the peso) is bad but you need to look at why we’ve gotten to this point.” And as Reuters goes on to report:
So you see, Argentina has big government and a strong state too, just like Spain. But unlike Spain, the government and the state have served the interests of everday Argentines quite well, and have told the transnatonal capitalist class to cram its neoliberalism up where the sun don’t shine.
“I think the major problem in the euro area is the lack of demand. Because the private consumption is falling, private investment is falling. And at the same time public expenditures are also cut back. So if you put these three things together… nothing else can come out of this, just deeper recession,” …(hmmm Pattern Familiar)
http://www.voanews.com/content/spains-unemployment-hits-record-numbers/1648516.html
shadowstats is showing USA a tweak under 25%…updated 4/2013
http://www.shadowstats.com/alternate_data/unemployment-charts
TK posted this Wed. in comments
Long-Term Unemployment Is The Biggest Crisis In America — This Photo Shows How Much Politicians Care
http://www.businessinsider.com/this-photo-shows-how-much-politicians-care-about-the-long-term-unemployment-crisis-2013-4
These countries with high unemployment and crushing debt overhang – join hands and disposes the EU – claim sovereignty and do the debt jubilee shuffle. Tax land and not the build out upon the lands. Make sure that Housing prices do not float upward…ever…ie: don’t let the rentiers get in on the basics of life….food, shelter, energy (not much to do here).
The plan… lower the cost of living and doing business and tax the crap out of unearned income. You as a sovereign nation would then be in a position where businesses of all types would be trying to get within your borders because the burden of high costs of living and doing business would be gone.
The USA at one point in the 1920s experimented with this type of tax system in areas like Pittsburgh and California. Where it was tried… businesses wanted in and so did people to live. It was the landed folk who were speculating in land and the Realtors who were promoting land speculation who overturned these tax structures…sad
The problem in Europe is a simple Labour theory of value crisis on one level.
European corporations seek to continue to add pointless value to its products so as to maintain profits.
They must destroy all labour value to do so.
This destroys all rational demand / employment , destroys typical market towns such as the above.
Take a look at typical post war European products.
Very little bells and whistles was on these utilitarian vehicles.
http://www.youtube.com/watch?v=LNHL_tKLbaM
Ask yourself why ?
Productivity should bring better wages and lower prices, or at least one of them. But it has brought high unemployment and higher prices. So productivity isn’t suicide merely because it cuts off demand from its own workers; it is doubly suicidal because it screws the consumer, and the supplier too whose own productivity cannot be exploited any further.
So as irony would have it, austerity is not the corrupt henchman of productivity, it is the executioner of productivity. Or maybe the death of productivity is the goal.
WP purgatory….
Did you put links in your post?
No.
How many more months will the Euro lasts?
All populist parties want out of the Euro. The trouble is that the rest of their program is dumb.
So the sooner the euro goes bust before the populists take over, the better.
Spain Slashes Economic Growth Forecasts
Spain’s government revises down its growth forecasts, as it unveils the latest reforms aimed at boosting its struggling economy.
http://news.sky.com/story/1083397/spain-slashes-economic-growth-forecasts
I sometimes think that “sovereign” currencies are part of some kind of conspiracy to make us all stupid(er). The only truly irreducible problems are physical, material ones; i.e. how to feed, clothe, house, educate and care for each other and ourselves with the resources and labor available to us. But we keep getting hung up on these little mult-colored pieces of paper.
Got a whole bunch of people with nothing to do in Spain? I bet there are some trash flotillas out in the Atlantic that could use some attention. I bet there are plenty of public and private spaces that could use some TLC. I bet there are plenty of things that actually need done in Spain and Europe generally, it’s just that they don’t have enough little pieces of multi-colored paper to accomplish them.
I had the same thought reading about the explosion in West, TX. Why wasn’t the fertilizer plant moved when the houses grew up around it? Why did the community form there in the first place and why did it never get re-located? Money, I’m sure. Not enough green pieces of paper to move the plant or the nursing home, which was built next to the plant in the first place because that’s the spot where you needed the fewest pieces of green paper to build, etc.
Technical considerations be damned! It’s the little green pieces of paper that decide how we do things in this country!
And, sadly, it’s the little multi-colored pieces of paper that decide how things are done in Europe…
Those “little multi-colored pieces of paper” are part and parcel of man’s ability and propensity to use symbolic thought.
The belief that people can be broken from the use of symbolic thought, psychologically speaking, is only slightly less unrealistic than the belief that people able to see colors normally can be broken of this habit.
You mean like gods, superstitions and magic? Exactly what it is: in “Chaos magick” terminology it’s called a “godform”: something that is imaginary, symbolic if you wish, but that achieves power and even personality of sorts of its own feeding on people’s faith. And that’s exactly what money (be it paper or gold) is.
The actual cost/value of something is left to the market to decide. Currency is gamed like all other assets. If we considered costs to be assets instead of liabilities maybe we could get some sane decisions. The most expensive options would look pretty good.
And yet Spanish bonds are rallying. Forget Rogoff, spreatsheet errors, etc. Austerity is clearly working since the higher the unemployment, the more your bonds will rally ;) I wonder whether the Japanese is buying those bonds? Isn’t that tantamount to a currency war?
@Can’t help
Of course unemployment helps the real value of bonds.
If capital can destroy labour faster then entropy it will keep winning until you get a larger collapse.
On the general matter, I see Spain in a path of clear catastrophic collapse. The tendency will probably be that of Greece but because the lack of charisma and resolution of United Left leaders and the conservative bipartisan design of the electoral system (that strongly overrepresents smaller provinces where only the twin parties can be elected de facto) the political evolution may be more complicated than in Greece and the system may linger only or mostly on repression alone while the confidence of the citizens collapses (it’s already extremely low already).
It’s like a socio-political black hole where the laws of common sense collapse and almost anything can happen.
Said that, Spain is just the tip of the European iceberg: nearly all states are in very bad socio-economic situation, including Germany, only that Spain is ahead, leading by mere gravitional inertia, the collapse.
“The beatings will continue until morale improves.” I believe this has become the EU and ECB’s slogan.
This guy is going to right up there with Hoover, Mellon, and Bruening in the history books for his total, stubborn, “wrongness.” http://www.reuters.com/article/2013/04/25/germany-growth-schaeuble-idUSB4N0CP01S20130425
Germany has the lowest youth unemployment figure (7%) and Spain/Greece(57%) the highest of all OESO-countries. The euro is far too expensive for Spain and too weak for the industrial powerhouse Germany. This experiment between Latin Europe and Germanic Europe will come to an end because social pressure will be unstopable somewhere down the road. Meanwhile the economic structure of Latin europe will deteriorate further and the inevitable financial costs for the Germanic countries will be devastating. Readers from the Netherlands are advised to visit: http://www.economie-macht-maatschappij.com/eurocrisis.html
With respect to the article, there are some other considerations that might provide a broader perspective. In Spain, throughout the middle of the last decade, the youth labor participation rate increased considerably as a result of the economic growth – participation higher than the European average (possibly, attracted by the high/immediate earning potential of work and corresponding, more or less, to the decline instead of those continuing education). And, post GFC, youth labor participation declined both as a proportion of available youth not being employed but also because a higher proportion then/now opted to remain in education or undertake vocational training (an increase of 16% since 2008), as was the case pre-GFC. Of course, there is still the issue of the “latent” impact of graduates on the number of unemployed (are qualified youth are more likely to get a job or not?) after all, they won’t stay full-time students forever.
Additionally, it should be noted that there has been a demographic decline in the population of 15 to 24 year old in Spain. Overall, the number of young people in the labor force (employed and unemployed) declined by 7%. Thus, the number of young people on the labor market has fallen, which, in turn, has slowed the rise in the number of unemployed and, at the same time, in purely arithmetical terms, also increased the unemployment rate.
Also, during the same period, the labor force participation rate among 25 to 64 year old increased (from 76.7 to 77.2 percent) and the population also expanded slightly, leading to a net labor force growth of two percent. So, as a baseline Spain’s youth unemployment, as a demographic, comparative measures of youth participation in the workforce should include both of these factors and be considered, together and not just in isolation. And, if these factors are taken together, it is likely that the growth of Spain’s youth unemployment has been neither stronger nor appreciably weaker than among adults. That doesn’t make youth unemployment any the better, in human terms, but it does point to the fact that unemployment in Spain is, likely, as equally impacted across the population demographic as a whole.
The highest youth unemployment rate is in Macedonia, followed by Spain, Greece, and Croatia. The rate is lowest in parts of Central Europe—in the Netherlands, Switzerland, Austria, and Germany. Very few countries had a youth unemployment rate that was lower in 2011/12 than in 2008; Germany is one of the exceptions. However, in Sweden and Italy, the youth unemployment rate is more than four times higher than the adult unemployment rate – again, Germany is at the other end of the scale with youth unemployment one and a half times higher than among adults. The principal variances can be attributed to the proportion of youth (15 to 24) included in the labor statistics and those that are excluded – due to remaining either in full-time education or vocational training.
On the whole, only a minority of the younger generation in the EU actually has a presence on the regular labor market; a larger share is in school or university education or undergoing vocational training. In this respect, press reports such as “Every second young Spaniard unable to find work” or “Half of all Greek young people unemployed” portray the situation much more negatively than it is in reality, as it is assumed that all young people are participating or want to participate in the labor market. Arguably, “only” a fifth of all young people in Spain are unemployed and in Greece, it is an eighth, which is the same as in the UK or Sweden. However, these figures are appalling and still point to a huge social problem.
As long as dumbass Europeans refuse to get out of the EU, they deserve to suffer. How many times does one have to stick one’s finger in an electric socket before one realizes that it is not best to do such stupid things?
Oh, go away, troll.