Spanish Prime Minister Remains Hopeful about the Economy

April 28, 2015Spainby EW News Desk Team

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Despite public frustration, Prime Minister Mariano Rajoy projects 2.9 percent growth in 2015 and 2016, while creating around 500,000 jobs. Rajoy is relying on economic progress to win a second term in office.

The recent forecast is an improvement from previous projections of 2.0 percent growth in September of last year and 2.4 percent expansion in February of this year. Analysts attribute the forecast hike to increased consumer spending, lower oil prices and the European Central Bank's quantitative easing policy. However, deep-rooted issues remain, such as high unemployment and stagnant wages.

Spain's Labor Problem

Spain's unemployment remains at 23.8 percent, and that figure is double for people under 25. Spain currently has some of the highest jobless rates in Europe. Unemployment rose in the first quarter because the dire economic situation caused many to stop looking for work or leave the country altogether. In addition, the International Labor Organization predicts that Spain's jobless rate will remain above 20 percent by the end of the decade. Spain's government also declared that the nation's jobless levels would remain above 22 percent at the end of the end of 2015.

Spanish Political Race

Rajoy stated that Spain's economic progress hinges on the standoff between Greece and the EU. He also said political instability would hamper the economy if more opposition parties came into power. However, Rajoy's center-right message is not resonating with many voters as they continue to suffer. Spanish voters in the southern region already voiced their frustration by voting out members of Rajoy's Popular Party in favor of socialist opposition. Other polls indicate that his party faces an uphill battle among local and regional elections. Parliament’s divide may increase as opposition parties could take up 18 to 22 percent of parliamentary seats.

Spain's Improvements

The government made numerous structural reforms, which is something that many nations throughout the EU have failed to implement. Officials closed the budget gap, reformed the labor market and saved failing banks from collapse. Critics contend that the labor reforms allowed companies to lower severance pay and fire more workers, contributing to higher unemployment levels and a lower standard of living.

Opponents also say the administration's policies have done little to address youth unemployment, while hurting the nation's poorest. Spain benefited from more investment and an improved construction sector in 2014, but much of this has gone unnoticed as far as the public is concerned. Until Spain implements additional reform measures that boost wages and lower the nation's employment rate, Rajoy's political future will remain uncertain.

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