As Other Nations Rebound, Spaniards Mired In Crisis

As the recession appears to level out in many countries, Spain's economy continues to slide. The 19 percent unemployment rate is getting worse, and mainstay industries are all suffering. Experts worry that as the rest of Europe recovers and interest rates rise, the many Spaniards already deep in debt will sink deeper.

STEVE INSKEEP, host:

Even as the economic crisis seems to be easing in the United States, things seem to be getting worse in Spain. There, the unemployment rate is the highest in the industrialized world. Jerome Socolovsky reports from Madrid.

JEROME SOCOLOVSKY: It's a sunny Saturday afternoon and a group of girlfriends greet each other with kisses at an outdoor cafe.

(Soundbite of crowd chatter)

SOCOLOVSKY: These 30-somethings have kept in constant touch since finishing college, where they all majored in geology. This time, they've arranged to meet at Plaza de las Prosperidad, Prosperity Square. It couldn't be a more ironic name considering how they've been doing lately.

Ms. ARANCHAS SANCHEZ DEL CANYA(ph) (Government Researcher): (Spanish spoken)

SOCOLOVSKY: I'm feeling pretty bad, says Aranchas Sanchez del Canya, who works as a government researcher. My life plan was clear: a government job that let me spend time with my two kids. I thought I was set for life. Now it looks as though it won't be that way.

Her boss recently told her that her contract would not be renewed. Her husband, a computer specialist, is just barely hanging on after the small IT firm he works for let go of most of its staff over the summer.

Ms. SANCHEZ: (Spanish spoken)

SOCOLOVSKY: You just can't plan for the future, Sanchez says. With unemployment now at 18 percent and forecast to rise even further next year, many people who still have jobs feel them slipping away. Unemployment for those under 25 is already nearly 40 percent. It's a far cry from the Spain of just a few years ago. A housing-fueled economic boom was creating a third of all new jobs in the European Union. With her geology degree, good grades, and the ability to speak several languages, Penelope Torre Alba(ph) says her opportunities seemed limitless.

Ms. PENELOPE TORRE ALBA: (Spanish spoken)

SOCOLOVSKY: It looked like the world was mine for the taking and that I could have any job I wanted, she says. But Torre Alba's employer just gave her a choice between layoff and temp status, which means she can be let go at will.

Unidentified Child: (Spanish spoken)

SOCOLOVSKY: The small playground on Prosperity Square is one sign that life goes on, despite the crisis. Serious social dislocation has been kept at bay by a welfare system that has cushioned the impact of job losses.

Prime Minister JOSE LUIS RODRIQUEZ ZAPATERO (Spain): (Spanish spoken)

SOCOLOVSKY: Spain's socialist prime minister, Jose Luis Rodriguez Zapatero, told Parliament that he thinks it's important to maintain social protections during a time of crisis. He's raising taxes to cover a ballooning deficit and the extra welfare payments. At the same time, his latest budget cuts investment in research and development. Critics say the measures are shortsighted and do nothing to restructure an economy that is overly dependent on construction and tourism.

(Soundbite of traffic)

SOCOLOVSKY: Outside the Spanish Parliament stands Lorenzo Amor, president of the National Federation of Self-Employed Workers. He says the current crisis will destroy more than half a million small businesses in Spain.

Mr. LORENZO AMOR (President, National Federation of Self-Employed Workers): (Spanish spoken)

SOCOLOVSKY: We're not selling or manufacturing or getting access to credit, and our loans are going bad, he says. We're being taxed at a rate that's designed for a healthy economy, he goes on, and there's no light at the end of the tunnel.

The prime minister's strategy mystifies many observers. Only last year, he gave Spanish tax payers a $600 rebate that's now being revoked. That policy shift has led to dissent, even within his ruling socialist party. And a leftist newspaper, El Pais, which usually supports the government, has blasted Zapatero's handling of the economy.

Back in Prosperity Square, Sanchez says she no longer believes the government's repeated assurances that things are about to get better.

Ms. SANCHEZ: (Spanish spoken)

SOCOLOVSKY: The impression they give is that they're groping in the dark, she says. And she's not alone. A recent survey found that 81 percent of Spaniards think the prime minister is just improvising his way through the crisis.

For NPR News, I'm Jerome Socolovsky in Madrid.

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