Spain Faces Massive Deficit, Economic Woes
The debt problems of Greece dominated the discussions among EU leaders at their summit in Brussels Thursday. But the size of the Spanish national debt makes the Greeks problem look tiny. Spain has the biggest debt of any of the countries that use the Euro. It is also is an important economy in Europe.
This is MORNING EDITION from NPR News. I'm Renee Montagne.
We've been reporting about the massive budget deficit in Greece and how that crisis is undermining Europe's common currency, the euro. But Greece is not the only European country with debt problems. Spain, which has a much bigger economy, also faces massive deficits and other serious economic woes.
As NPR's Eric Westervelt reports from Madrid, some Spaniards complained that their political leaders have not taken the tough decisions needed to ease the crisis.
ERIC WESTERVELT: At first glance, little on central Madrid's streets speak to the ongoing financial crisis here. Many cafes and restaurants are packed; rows of cured pork loins, the size of small engines, hang in eatery windows. But when you look skyward, buildings everywhere are dotted with for-rent and for-sale signs, testaments to the real estate bubble that burst nearly two years ago. The country is still reeling.
The resulting joblessness in Spain at first was largely confined to the construction and service sectors. Today, with unemployment nearing 20 percent, nearly all areas of the workforce are affected, including the well-educated. Thirty-two-year-old biologist Jordi Collonques recently lost his hospital job. His wife is six months' pregnant with their first child.
Mr. JORDI COLLONQUES (Biologist): (Foreign language spoken)
WESTERVELT: Personally, my future looks pretty dark because the crisis in Spain will last longer than in the rest of Europe, he says, and I don't see any big changes in the domestic economy. People are not changing their habits, like being more productive or saving more, he says.
The socialist government, led by Prime Minister Jose Luis Rodriguez Zapatero, recently announced a plan to cut the equivalent of nearly $70 billion from the budget over three years, to try to control the soaring deficit. But Zapatero has refused to make unpopular cuts to the social welfare system, or to force through changes to Spain's strict labor rules.
Professor GAYLE ALLARD (Economics, Instituto de Empresa): You know, Spain has the worst possible combination. It's got generous unemployment benefits, which give you incentives to be unemployed, and then it's got the rigid labor market.
WESTERVELT: Gayle Allard is an economics professor at Madrid's Instituto de Empresa. She says Spanish officials are right, in some ways, to bristle at economic comparisons to Greece. Unlike Greece, she points out, the Spanish were not cooking their financial books, and Spanish economic fundamentals before the crisis looked pretty good. The government was running a big surplus. Today, however, it's running a massive deficit, fed by stimulus spending and generous unemployment benefits.
Prof. ALLARD: The problem, I think, in Spain is that the government has shown absolute inaction in coming to terms with the recession, and coming to terms with the deterioration in public accounts and the unemployment problem.
So if the markets toss Spain into the same bag as Greece, I think it's going to be the government's fault, in the sense that they've not responded with any sort of decisive action.
WESTERVELT: Some are a bit philosophical about the crisis. Jose Maria Ridao is a columnist for the Madrid daily El Pais. He says during the crazy, runaway housing bubble, few wanted to talk about diversifying the economy. Now, Ridao says, the bad economic times are a good chance for the country to rethink its priorities.
Mr. JOSE MARIA RIDAO (Columnist, El Pais): Because we were not living in a real world. We were living in a world in which we thought we were rich, and we were richer than our fathers and our grandfathers. But we have to pay more attention to the real world and to real things.
WESTERVELT: Ridao says Spain should invest in education, research and culture, and move away from its reliance on tourism and real estate. But first, Spain's politicians, Ridao says, need to show real leadership.
Eric Westervelt, NPR News, Madrid.
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