Spain's Boom To Bust Illustrates Euro Dilemma Spain, the erstwhile "Iberian Tiger" and once the biggest creator of jobs among Europe's 16-nation single currency zone, is now struggling with a 20 percent jobless rate. It's stymied by the lack of a manufacturing base, an inequitable labor market and a limited social safety net.
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Spain's Boom To Bust Illustrates Euro Dilemma

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Spain's Boom To Bust Illustrates Euro Dilemma

Spain's Boom To Bust Illustrates Euro Dilemma

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MARY LOUISE KELLY, Host:

Until pretty recently, Spain was the biggest job creator among the 16 European nations that use the euro as their common currency. But the world financial crisis has dealt a devastating blow to Spain's economy. The country now has a 20 percent jobless rate, the highest in the eurozone, and drastic cuts in government spending are only adding to anxiety about the future. As part of our series this week on the challenges to European unity, NPR's Sylvia Poggioli reports from Madrid.

SYLVIA POGGIOLI: Thirty-year-old Gloria Morigosa just lost her job as a secretary.

GLORIA MORIGOSA: The situation is very hard.

POGGIOLI: And who do you blame?

MORIGOSA: (Italian spoken)

POGGIOLI: Consumerism?

MORIGOSA: (Through translator) People who had not many resources - financial resources spent a lot of money, more than they had. They asked for a lot of credit, and with the real estate boom, they thought they could spend a lot of money.

POGGIOLI: Economist Juan Jose Dolado explains some of the euro's effects on the Spanish economy.

JUAN JOSE DOLADO: All of the sudden, we adopted German interest rates, single currency, single interest rate. We became like the Germans. So interest rates went down a lot. So investment became very profitable. So it made sense to specialize in bricks as we say. Sun and bricks: This is our industrial specialization.

POGGIOLI: In 2006, there were more housing starts in Spain than in the U.K., Germany, France and Italy combined. Cheap money brought a burst of self-confidence and a consumption binge. But the economic crisis in 2008 burst the bubble, and two- and-a-half million jobs have since been wiped out. Spaniards found themselves with more than a million unsold new housing units and no manufacturing base to fall back on.

(SOUNDBITE OF CROWD CHATTER)

POGGIOLI: Nowhere is that more obvious than at the household appliance floor of Madrid's big department store, El Corte Engles.

AEG: With the euro, that's no longer possible. And so, while southern Europeans focused on untradeable goods, like housing and services, they lost competitiveness. And the heavily industrialized and efficient Germany became the biggest exporter in Europe.

JOSE DOLADO: So the rest of the countries lost ground. They couldn't export so much. They incurred big current account deficits, et cetera.

POGGIOLI: Unidentified Man: (Italian spoken)

POGGIOLI: These young men gather at a youth center in a working-class section of Madrid. Like most Spanish youth, they live with their parents. It's a system called the cushion - the unofficial safety net for the younger generation. Raul Rivas is 20 and has been in and out of many jobs.

RAUL RIVAS: (Through translator) We all want to be independent and have our own place. But the conditions don't exist. We cannot dream of renting a room with five other people. We just can't afford it.

POGGIOLI: Spain's big construction boom attracted large numbers of young males. Thirty percent even dropped out of high school in order to start making money. Most of them are now jobless. Twenty-year-old Manuel Rodriguez is the only one here still studying at university.

MANUEL RODRIGUEZ: (Through translator) Today, a degree doesn't mean a thing. It doesn't guarantee you a job. It doesn't matter if you study or not. I certainly feel like I'm part of a lost generation.

POGGIOLI: Sociologist Antonio Lopez Pelaez says Spain, like other Mediterranean countries with low birth rates, is no country for young men.

ANTONIO LOPEZ PELAEZ: (Through translator) The welfare state in Spain focuses on health and the elderly. It's families that support young people, and there are more resources for the elderly than child care centers.

POGGIOLI: Economist Dolado says if southern Europe is to remain a player in the European Union, it must learn from its northern partners, where there is good job training for the unemployed and young people.

JOSE DOLADO: Education and labor market are the two key reforms that this country needs. The power is in the brain these days, not any longer in the hands, as it used to be in the past.

POGGIOLI: Sylvia Poggioli, NPR News.

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