Spain’s economy grew for the first time in two years in the third quarter, the central bank estimated yesterday, exiting the second recession since 2008. Prime Minister Mariano Rajoy, half-way through his term, is pledging job creation starting next year as he tries to convince the 56 percent of young Spaniards who are out of work that they have a future in Spain.
The economy is starting to recover as foreign investors buy into the nation’s stock and bond markets, sending the main Ibex 35 index up 21 percent this year. The spread between Spain’s 10-year borrowing costs and Germany’s has narrowed to less than half its peak in July 2012.
Rajoy’s government, led by the pro-business People’s Party, has overhauled labor rules to make it easier to lower wages and cheaper to fire staff. The legislation allowed Solaria Energia & Medio Ambiente, a solar-panel maker, to cut wages by 16 percent in a deal announced this month. As wage costs decline, companies including Ford Motor Co. are increasing production in Spain.
Jobless Long-Term
The new legislation, like an overhaul passed by the previous administration, wasn’t enough to prevent 3.8 million jobs being destroyed in the crisis that started when a debt-fueled building boom collapsed. The nation may be saddled with an unemployment rate of more than 25 percent until 2018, according to estimates by the International Monetary Fund.
Faced with those forecasts and evidence that some unemployed may be working illegally, Rajoy’s administration is looking for other ways to reduce the jobless rate. The government, which has budgeted 30 billion euros ($41 billion) for jobless benefits next year, is planning to crack down on people claiming benefits while working in the underground economy and to prevent them rejecting job offers, Deputy Prime Minister Soraya Saenz de Santamaria said on Oct. 11.
Telefonica SA Chairman Cesar Alierta said this month that the unemployment rate is overstated because of the size of the shadow economy, and Saenz de Santamaria said more than 500,000 jobless claims contained fraudulent elements.
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