Monday

11th Dec 2023

Spain facing 'exceptional' economic hardship

  • Worries are growing over the Spanish economy (Photo: EUobserver)

Spain is heading toward "something exceptional" as youth unemployment and public spending soar during a historic recession, with a top ratings agency downgrading Madrid's ability to pay back debt.

US agency Standard & Poor's (S&P) reduced Spain's "AAA" credit rating to "AA+" on Monday (19 January), making it the first country to lose the company's highest classification since Japan in 2001.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The move comes amid fears over Spain's public finances as it attempts to spend its way out of recession, with the S&P downgrade set to make matters worse by increasing the cost of public borrowing.

"Current economic and financial market conditions have highlighted structural weaknesses in the Spanish economy," the agency said in a statement.

Madrid has launched a fiscal stimulus programme worth €90 billion in a bid to relieve the economic downturn. It has also guaranteed €100 billion in new bank debt atop the purchase of €50 billion in bank assets to relax the credit crunch.

Spain last week forecast its economy will contract 1.6 percent this year before a slight pick up in 2010, with unemployment to climb from 13.4 to 15.9 percent.

The figures augur the worst recession in 50 years. But European Commission estimates are even more pessimistic, saying unemployment will hit 16.1 percent this year and almost 19 percent in 2010.

As unemployment soars, government tax revenues will shrink while spending on social support will increase, with Spain's public deficit to reach 6.2 percent of GDP this year, Brussels forecasts.

Youth unemployment is a particular worry in the country, the member state with the highest rates of young jobless, already on 29.4 percent.

Spanish youth describe themselves as "mileuristas" - the Spanish for the low figure of €1,000 they earn every month - echoing militant Greek youth which calls itself "the €600 generation."

This year has already seen widespread student demonstrations across Spain over education reform but little in the way of economic protests. Local commentators and the government however worry this may change.

Finance minister Pedro Solbes described Madrid's fears in a Sunday interview with daily newspaper El Pais.

"We are living in a very unusual situation and different from everything that has happened," finance minister Pedro Solbes said in an interview with the El Pais daily this weekend.

"We are heading towards something exceptional."

Meanwhile, S&P warned that Ireland and Portugal are in danger of similar downgrades. Greece's rating was already knocked down from "A" to "A-" last week ahead of the Spanish move.

Spain's Nadia Calviño backed to be EIB's first female chief

With less than a month to go before the start of a new leadership of the European Investment Bank, the world's largest multilateral lender, the path seems finally clear for one of the candidates, Spanish finance minister Nadia Calviño.

Analysis

Is there hope for the EU and eurozone?

While some strengths may have been overlooked recently, leading to a more pessimistic outlook on the EU and the euro area than the truly deserve, are there reasons for optimism?

EU public procurement reform 'ineffective', find auditors

The EU Commission reformed procurement directives to make bids more attractive (and competitive), but the reform has failed, say auditors. Procedures now take longer, and the number of direct awards and individual tenders has increased over the past decade.

Spain's Nadia Calviño backed to be EIB's first female chief

With less than a month to go before the start of a new leadership of the European Investment Bank, the world's largest multilateral lender, the path seems finally clear for one of the candidates, Spanish finance minister Nadia Calviño.

Analysis

Is there hope for the EU and eurozone?

While some strengths may have been overlooked recently, leading to a more pessimistic outlook on the EU and the euro area than the truly deserve, are there reasons for optimism?

Latest News

  1. How Moldova is trying to control tuberculosis
  2. Many problems to solve in Dubai — honesty about them is good
  3. Sudanese fleeing violence find no haven in Egypt or EU
  4. How should EU reform the humanitarian aid system?
  5. EU suggests visa-bans on Israeli settlers, following US example
  6. EU ministers prepare for all-night fiscal debate
  7. Spain's Nadia Calviño backed to be EIB's first female chief
  8. Is there hope for the EU and eurozone?

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Join EUobserver

Support quality EU news

Join us