Further and prolonged economic difficulties have been predicted by Jose Luis Rodriguez Zapatero, (The prime Minister of Spain) long after the country pulls itself out of this dark recession.
On Wednesday of last week the prime minister was reported to warn that despite claims that the worst of the crisis is over, high unemployment rates and a slowdown in business are unlikely to see drastic improvements in the short term. Unemployment in Spain is the highest in the European Union, standing at nearly 18 percent, and there has been no improvement on Spanish property sales with figures down a third from 2008 – 2009.
Despite higher unemployment figures, claims for unemployment benefits in August were less than the previous year, probably due to stricter applications.
The prime minister Zapatero, also reported that Q2 saw the economy contract 1.1% which was the fourth quarterly fall in a row, although if you look at a glass half full rather than half empty, then the good news is that the drop wasn’t anywhere nears as bad as Q1. He also remarked on the fact that automobile sales were now stabilising after many months of strong decline - So it’s not all bad news!
Zapatero said that Spain still remains in a deep crisis that can and will only be overcome once the economy begins to start creating jobs once more, and in a stable fashion.
For instance, the rise in unemployment claims has clouded any progress achieved during the last quarter, when the government shelled out billions creating public-sector jobs.
Zapatero reported that there has been so much damage to the economy that “we are going to take a considerable amount of time to digest the consequences of the crisis,"
The Labor Ministry added that unemployment may reach as high as 20% during the next quarter, and even as the prime minister reported the above to the legislature, it was reported by the government that Spanish property sales are down 31% in the first half of the year in comparison to the same period in 2008.
Figures like these conclude how Spain, although once a European economic success story, still remains in a deep recession despite other European countries showing signs of recovery from this economic downturn. Although Spain is struggling to see the light at the end of the tunnel France and Germany have both reported growth for Q2, giving them unexpected hope and lifting them out of the danger zone and their worst recession in many years.
Zapatero has informed Parliament that his government will introduce an austerity program in 2010 and raise taxes to subsidise the deficit that is expanding and joblessness benefits.
Although it is not clear which taxes will be increased, he has made it known that he intends to bring in revenue equivalent to 1.5% of Spain’s gross domestic product.
The leader of the conservative party Mariano Rajoy has contested that it was a very large sum of money, an estimated fifteen billion Euros, and wanted to know exactly where he expected this money to come from.
Income tax hikes have been struck off the list, and it has been leaked that the government may be planning higher levels of tax on capital income, including windfall profits, stock dividends and interest earned on bank deposits.
The prime minister has been accused by Marino Rajoy of trying to mislead Spanish citizens regarding the full extent and gravity of their economic problems..
He added that "To confuse a deceleration of the pace of decline with an improvement is just plain wrong,"