The latest unemployment figures from Spain must send a shock through the powers that be in most major economies.
The latest numbers show that unemployment is up again in Spain. It has now breached 17%. Thats right, 17%. The BBC reports on it here.
To be fair, Spain has a seasonal economy because of the huge numbers of tourists that flock to the sunshine each year. This means that on one level, these might be worse numbers than normal because of the possible fluctuations. Perhaps in two months time when the tourists start to arrive, this will sort itself out.
Or perhaps not. This recession is now hitting such a wide array of countries and sectors that it seems safe to presume that tourist numbers will be down this summer when compared to last year.
Another problem is that, as you may know, large parts of the Spanish economy simply close for August. The weather is so hot in some places (I am thinking of Barcelona) that the locals close and leave for cooler climes. This is just when the tourist euros will be arriving. If they do.
A major problem is that the Spanish economy has also been heavily weighted for a number of years to real estate. This has been the case in both the Spanish and expat communities. Thus, when a global house price boom ends, economies that have experienced the highest highs are likely to feel the full force of the fall.
I recall writing about the potential problems after a trip to Spain some time ago. I had visited British expats and noted some of the imbalances in the Spanish economy. Although at the time, I mostly looked at the potential harm to the Brits, the likely repercussions did not need a Nobel Prize to spot.
Spain is not a small and insignificant economy. It is a member of the European Union and they use the euro currency. These links mean that their economy is not as isolated as it once was. This impacts all of Europe. The problem is how can Europe try and help one nation when they are all suffering in similar ways?
I can recall a discussion in the office a few weeks ago. A colleague that follows EU policy very closely told me about the words of the Spanish delegation in Brussels for a conference. Apparently, they said that the economy was in such bad shape that pretty soon they will become an agricultural economy and stay that way for a decade or more! That is trouble indeed.