Catch 22’ Wages Threaten As Spain Joblessness Soars

[abharrisson]

thats what we are going to see here.

On another point wage cuts are being tried all accross europe becasue firing people is too expensive... some comapnies are offering employees the opportunity to take a five year sabatical on 30% of their wages with the right to come back to work on full wages at the end of five years..... it'll be great for some people I suppose.

[crash2006]

As Spain sinks deeper into recession and the jobless rate heads for 20 percent, the highest in Europe, employers are telling workers to accept wage cuts if they want to stay competitive. That’s making it harder for households to tackle a debt load built up during the country’s economic boom and equivalent to 18,000 euros ($25,700) per person.

“There’s a Catch 22 problem for Spain,†said Dominic Bryant, an economist at BNP Paribas SA in London. “The solution for the competitiveness problem makes their debt problem worse. By squeezing wages you weaken the domestic economy further.â€

thats what we are going to see here.

[abharrisson]

thats what we are going to see here.

That "catch22" effects so much of whats happening..... its most evident with the banks.. eg they lend £1m to a company then becasue of the worsening credit situation cut back their overdraft which in turn forces them under and the bank loses the £1m loan...... the company would argue if the overdraft had been supported the company would have kept going the loan would have been repaid and in the meantime the bank would have made even more money... as it is it lost £1m and the overdraft earnings..... banks see this as protecting their balance sheet and in some cases it is but in many its just value destroying... and thats before you even get into the knock on effect of downstream personal defaults caused by making those people and others redundant..... business sense goes out of the window in times like these to be replaced by a bizarre destructive test of strength....

[crash2006]

On another point wage cuts are being tried all accross europe becasue firing people is too expensive... some comapnies are offering employees the opportunity to take a five year sabatical on 30% of their wages with the right to come back to work on full wages at the end of five years..... it'll be great for some people I suppose.

And we get price starting to rise, those buyers are goign to get a kick up their butt.

[brianc_li]

This is one of the more thoughtful pieces I have seen on the Spanish economy in some time.

http://spaineconomy.blogspot.com/2009/05/s...s-in-april.html

"So as I say, debt to GDP is most probably rising even now, but it is obviously going to have to come substantially down, which is why I insist on saying, this correction has hardly even gotten underway yet. "

[leicestersq]

thats what we are going to see here.

In the UK, the Bank of England has been printing money dont you know. It would appear to be the correct policy to carry out when you are faced with the alternative of a destructive downward deflationary debt spiral.

Pity poor Spain. Entry into the Euro means your ability to print money is lost. And that is what they need to do to counter this problem.

Yet another reason to stay out of the Euro.

[Guest redwine]

On another point wage cuts are being tried all accross europe becasue firing people is too expensive... some comapnies are offering employees the opportunity to take a five year sabatical on 30% of their wages with the right to come back to work on full wages at the end of five years..... it'll be great for some people I suppose.

five years is far too long anything can happen to a company if you left this year you would go back to work in 2014

its probably a new way of getting rid of workers i am sure that the staff that have the new "five year deal" know that they wont be going back people near retirement age

hertz in france has cut back the wages of its executives it was either that or get sacked

its just as easy to be sacked in europe or the uk

[Johnny Storm]

Pity poor Spain.

Its a nice warm place to be unemployed though

Would you rather be unemployed in dismal Brtiain? (Did you enjoy our 4 day summer?) or in Sunny spain?

[AThirdWay]

Its a nice warm place to be unemployed though

Would you rather be unemployed in dismal Brtiain? (Did you enjoy our 4 day summer?) or in Sunny spain?

Rather be in Scotland thanks, regardless of my financial situation.

Edited June 3, 2009 by AThirdWay

[LiveAndLetBuy]

five years is far too long anything can happen to a company if you left this year you would go back to work in 2014

its probably a new way of getting rid of workers i am sure that the staff that have the new "five year deal" know that they wont be going back people near retirement age

hertz in france has cut back the wages of its executives it was either that or get sacked

its just as easy to be sacked in europe or the uk

The company in question is BBVA:

http://www.telegraph.co.uk/news/newstopics...-years-off.html

It's one of the biggest banks in Spain and would be deemed "too big to fail" if the shtf.

However, you are correct that it is a cheaper way of getting rid of workers. I know a few people here in Madrid who have zombie jobs because their employer can't afford to fire them. In Spain you get nearly 2 months full pay for every year you've worked with a company. For employees with over 8 years of employment, it can work out cheaper to pay them a third of their salary for 5 years, and have the option of getting them back later on. It's also illegal to cut someone's wages in Spain - companies have to be very "creative" in that respect as well.

[Bloo Loo]

In the UK, the Bank of England has been printing money dont you know. It would appear to be the correct policy to carry out when you are faced with the alternative of a destructive downward deflationary debt spiral.

Pity poor Spain. Entry into the Euro means your ability to print money is lost. And that is what they need to do to counter this problem.

Yet another reason to stay out of the Euro.

and why, do you think, printing money, is going to help wages? or the economy? or anything at all?

[Lone_Twin]

In the UK, the Bank of England has been printing money dont you know. It would appear to be the correct policy to carry out when you are faced with the alternative of a destructive downward deflationary debt spiral.

Pity poor Spain. Entry into the Euro means your ability to print money is lost. And that is what they need to do to counter this problem.

Yet another reason to stay out of the Euro.

Of course rather than robbing value out of the money of people who have it to give to the bankers via idiotts in debt you could try something radical like not being a thief.

Just a thought.

Have you just swallowed government fallacies hook line and sinker or are you independantly evil?

[LiveAndLetBuy]

and why, do you think, printing money, is going to help wages? or the economy? or anything at all?

Spain's going to get deflation (in fact I believe Spain has already got it). I assume the poster was referring to their need to devalue their currency.

[Tim Miller]

thats what we are going to see here.

How right you are, Spain's external debt per capita is $57,091, you think that is bad, the UK comes in at 2nd worst in the world at ..............wait for it...............drum roll please.......................$153,616. Mind you Ireland comes in at 1st position with a figure of a staggering $549,819! See http://www.cnbc.com/id/30308959?slide=15

I think all those that see green shoots are in for a bit of a disappointment if not a shock! The UK is somewhat fooked!

Edited June 3, 2009 by Tim Miller

[Bloo Loo]

How right you are, Spain's external debt per capita is $57,091, you think that is bad, the UK comes in at 2nd worst in the world at ..............wait for it...............drum roll please.......................$153,616. Mind you Ireland comes in at 1st position with a figure of a staggering $549,819! See http://www.cnbc.com/id/30308959?slide=15

I think all those that see green shoots are in for a bit of a disappointment if not a shock! The UK is somewhat fooked!

you forgot Zimabwe

Z$145892735098248656982134210575093521649659281734812490975.45

[Trampa501]

Spain's joblessness soars?????

What are you people on?

The jobless rate is far too high in spain, but at long last (after 14 months) the corner has been turned. Unemployment in Spain fell in May!

Spanish jobless falls

Well done Zapatero and his government. Let's hope it continues!

[Lone_Twin]

Spain's joblessness soars?????

What are you people on?

The jobless rate is far too high in spain, but at long last (after 14 months) the corner has been turned. Unemployment in Spain fell in May!

Spanish jobless falls

Well done Zapatero and his government. Let's hope it continues!

I don't know a great deal about the spanish economy but are you basing your statement that "the corner has been turned" on a single month's unemployment figures?

Also, what was % change?

[abharrisson]

five years is far too long anything can happen to a company if you left this year you would go back to work in 2014

its probably a new way of getting rid of workers i am sure that the staff that have the new "five year deal" know that they wont be going back people near retirement age

hertz in france has cut back the wages of its executives it was either that or get sacked

its just as easy to be sacked in europe or the uk

The difference being its much more costly in france which is why sabaticals on part pay and reduced hours and wages are leading the way.... incomes in france for instance wil reduce massively through these measures without a correspondimgly large jobless count

[Trampa501]

I don't know a great deal about the spanish economy but are you basing your statement that "the corner has been turned" on a single month's unemployment figures?

Also, what was % change?

That's actually a valid point. I posted in response to others who swallow the line "Euro countries are f*****d" knee jerk response without even analysing the true situation. In my opinion the Spanish economy will probably look a little healthier for 2 or 3 months (their car plants, like those in the UK are starting their production lines going again; other industries they have like wind power will probably do ok), however I can't really see their housing market recovering for a long time, and next winter the jobless figures may again rise. Unless of course there's a sudden surge of buyers from other Eurpean countries, which looks unlikely!

[LiveAndLetBuy]

That's actually a valid point. I posted in response to others who swallow the line "Euro countries are f*****d" knee jerk response without even analysing the true situation. In my opinion the Spanish economy will probably look a little healthier for 2 or 3 months (their car plants, like those in the UK are starting their production lines going again; other industries they have like wind power will probably do ok), however I can't really see their housing market recovering for a long time, and next winter the jobless figures may again rise. Unless of course there's a sudden surge of buyers from other Eurpean countries, which looks unlikely!

I think Spain's main industries are agriculture, construction and tourism. Two of those are completely screwed at the moment. I think their banks have been hiding bad loans by continuing to overvalue property and they'll get caught out by that eventually. Although they are a world leader in wind power, I'm not sure how much it helps their economy at the moment. At least they don't have to rely on Russia for their oil. I still think the trick up their sleave is the extensive high speed rail network they are building. Hopefully it will boost the infrastructure while giving all their builders something useful to build.

I do agree that it is tiresome when everybody comes out with the usual clichéed stereotypes when talking about foreign countries. I'm surprised nobody has come out with the usual xenophobic crap about PIGGS on this thread yet. When you consider what most Spanish people's experience of Brits is like, it's amazing they don't look down on us.

[interestrateripoff]

The only solution to get out of this catch 22 is to write off the debt. There is too much debt on individual and govt level.

Just think what will happen to the tax take if the low wage earners are forced to take 10% - 20% wage cuts.

Then other low wage economies will have to slash wages as well, it all becomes a vicious cycle.

The only option they have to reset the counters is to wipe off the debt. This in it self creates a whole host of problems. This is certainly the nightmare catch 22 everyone hoped would be someone else's problem in the future.

Govt needs current wage levels to keep their debts sustainable. Something is going to have to give.

[huw]

In the UK, the Bank of England has been printing money dont you know. It would appear to be the correct policy to carry out when you are faced with the alternative of a destructive downward deflationary debt spiral.

Pity poor Spain. Entry into the Euro means your ability to print money is lost. And that is what they need to do to counter this problem.

Yet another reason to stay out of the Euro.

Exactly: they can only adjust by means of nominal wage cuts leaving their debts even more burdensome; we can reduce real wages through devaluation, devaluing the debt by the same amount.

[huw]

Of course rather than robbing value out of the money of people who have it to give to the bankers via idiotts in debt you could try something radical like not being a thief.

Where that happened there never was any money, it was illusory all along -- all based on promises to service debt; to the extent that the promises could never be kept, the money was never there (but it felt pleasant believing it was ).

[Guest redwine]

The difference being its much more costly in france which is why sabaticals on part pay and reduced hours and wages are leading the way.... incomes in france for instance wil reduce massively through these measures without a correspondimgly large jobless count

wages are already low in france the miniumum wage has become the "normal" wage here for a majority of the population

at the moment there mass factory close downs going on here goodyear,caterpillar,continental tyres just to name a few

3 million unemployed and its going to get worse

there are always ways in which a french employer can get rid of staff without giving them a euro

[Jie Bie]

Well, if you are Scottish you are in the minority as most Scots leave.

I left for a few years and came back. Don't think I would want to live anywhere else again.

You can keep GB though!