The euro zone unemployment figures are out today and they are not a pretty sight at all. With celebrations in the Netherlands due to the abdication of Queen Bea, celebrating her time on the throne, rather than celebrating she has abdicated (abdication is a Netherlands tradition) to the misery of Spain. You can find both extremes of the spectrum all within one economy.
It is truly frightening to see the unemployment rate in Greece and Spain at 27.2% and 26.7% respectively, while Austria and Germany have the lowest at 4.7% and 5.4%. Add on to this youth unemployment of 59.1% in Greece and 55.9% in Spain and the magnitude of the crisis in the euro zone can be seen.
When a local economy has negative growth for 2 consecutive quarters it is considered a recession, and when its GDP declines by more than 10% then you are in a depression. Spain is fighting for its survival and has 6 million now unemployed, the last time that happened was in 1976 the year after Franco died. What is more scary is that in the Great Depression of the 1930s, Hitler came to power when unemployment reached 6 million! Desperate people take desperate measures and are willing to do anything to protect and provide for their family.
The problem Spain has is there are still no good signs on the horizon as economic forecasters predict a negative growth for the remainder of 2013, that will mean 10 quarters of decline, but it will also mean unemployment will rise even higher. In country such as Spain who do not pay unemployment benefits to anyone who has been out of work for more than 2 years, there will be some seriously desperate people! If the unemployment rate continues to rise, how on earth is the economy supposed to generate growth? It is the private sector that generates growth, but businesses have no staff and they have no customers with any money to buy anything. The cash flow has been broken and it needs to be restarted again.
We can consider ourselves fortunate even if we are finding it tough. The UKs unemployment rate is currently at around 7.8% or 2.5 million. What would we be like if we were at Spain’s rate? It would mean around 8.8 million unemployed!!! The reasons why we are thankfully not even close to this rate is due to a number of reasons; we are not part of the euro; we are able to set our own interest rates; the Bank of England can pump more money into the economy through Quantitative Easing; and in a final act of salvation we can always devalue our currency.
How happy are we that we didn’t fully sign up for Europe, and who we have to thank for that all those years ago! The interesting thing to see now, is how the local council elections will go on Thursday. The Coalition parties will find it hard (Tories lose c325 seats), but will Labour or UKIP benefit? Guess that all depends on whether people vote on local or national issues.