Spanish Economy Undergoes Superficial Recovery

January 8, 2016Spainby EW News Desk Team

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Barclay’s analysts Apolline Menut and Antonio Pascual dispel the mainline narrative of a Spanish recovery, highlighting long-term unemployment, waning productivity and a high unemployment rate as unsustainable liabilities, according to Business Insider.

The job market gained a great deal of traction in 2015, but analysts note that Spain's current status would prove catastrophic in other nations. Spain is one of the fastest-growing economies in the European Union, but unemployment stands at over 20 percent, with youth joblessness remaining over 55 percent.

Prime Minister Mariano Rajoy has touted Spain's semi-recovery as a sign of dark days passing, but many analysts say otherwise. Spain's joblessness will become the country's Achilles' heel going forward, and leaders have yet to find viable solutions that could improve the job market. Proponents note that the Spanish-speaking country added more jobs in 2015, but the crux of the problem lies with the lack of full-time employment available to the populace.

With that, the economy created a variety of part-time jobs, forcing many to accept positions with low pay and little room for advancement. The plethora of dead-end jobs has partly fueled a black economy where people can find meager work while dodging tax obligations.

Spain's job market is dismal, but this isn't to say the government hasn't tried. Spain is one of the few nations in the EU that focused on structural reform to fix the economy, but some changes exacerbated job losses in certain areas, most notably contract workers who found themselves without work as the government allowed employers to lay them off during hard times.

Other reforms may end up on hold as the government struggles to assemble a cohesive parliament after national elections saw the ousting of many conservative incumbents. With his coalition in disarray, Rajoy remains paralyzed as he can do little to solve the country's mounting problems.

Far-leftist party Podemos gained more seats in parliament and is expected to partner with the establishment Socialist Party. Ciudadanos (Citizens Party) is another minor party that gained a prominent position during the elections, and with parliament filled with multiple parties of conflicting perspectives, it begs the question as to whether the state can tackle the unemployment crisis, among other issues such as corruption and the separatist movement in Catalonia.

The left may have the upper hand.  However, with Rajoy's Popular Party retaining a narrow majority, Spanish politics will stay contentious in the foreseeable future.  The Socialists have ruled out the possibility of a partnership with PP.

Barclay’s analysts predict an unstable political climate that will hamper investment from the private sector, but Spaniards can expect a modest uptick in real wages in the next few months, and the overall economy will benefit from monetary policies and lower oil prices. King Felipe VI intends to nominate a new prime minister after January 13, when the reformed parliament will meet.

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