The Pain In Spain

• Standard & Poor's cut its ratings on Spain by one notch to AA from AA-plus Wednesday, saying a longer-than-expected period of low growth could undermine efforts to cut the budget deficit.
  
  The outlook is negative, reflecting the possibility of another downgrade if Spain's fiscal position worsens more than S&P currently expects, the agency said in a statement.
  
  "In our opinion, Spain is likely to have an extended period of subdued economic growth, which weakens its budgetary position," Standard & Poor's said.
  
  "We now project that real GDP growth will average 0.7 percent annually in 2010-2016, versus our previous expectations of above 1 percent annually over this period," S&P said.

That was from the article posted on CNBC: S&P Cuts Spain's Rating One Notch on Economic View

Despite the downgrade, on the Syndey Morning Herald Spain 'on track' after credit downgrade‎

• Spain is on track to bring its public deficit within an EU limit by 2013, its finance minister said on Wednesday after ratings agency Standard & Poor's cut the country's credit rating.
  
  "We have a plan to reduce the deficit, we are putting it in place, we are meeting one by one all the timelines which we have set," Elena Salgado said during an interview with public television TVE.
  
  "I believe the markets will evaluate the situation this way. When the situation in Greece is resolved, I believe things will return to their right place," she added....

Published on ABC.es. Un desliz del INE desvela que la tasa de paro superó en marzo el 20%, la peor desde 1997

With the help of Uncle Google's language translation: here

• An error by the National Institute Estadísitca (INE) provided further insights on the morning of yesterday, for a few minutes, unemployment data from the Labour Force Survey (LFS) for the first quarter of 2010 to be made public on Friday.
  
  According to those who had access to the paper, the unemployment rate in the first quarter rose to 20.05%. Es It is the first time since 1997 that exceeds the benchmark rate of 20%. The clarification came in the early hours of the morning.
  
  The EPA in the first quarter of 2010 indicates that the number of unemployed persons was 4.6127 million, ie more than 286 200 end of 2009 (4.3265 million). .....

A 20.05% unemployment?!!!

Surprisingly, this incredible high rate of unemployment is not unexpected. I remembered the following posting on Nakedcapitalism back in July 2009: Spain: Bleak forecast puts unemployment at 22% in 2010

• Citigroup has just released a forecast which is very troubling in regards to employment and growth in the Spanish economy. With unemployment already having hit 17.9%, Citigroup expects layoffs to increase this to 22% in 2010....
• Basically, things are looking bleak in Spain despite the positive spin some are putting on today’s numbers. Hopefully my last two posts on Spain, House price declines accelerate in Spain and Hypo Real Estate need for 10 billion also reveals huge problems in Spain, give you a sense that there is more downside to come for Spain’s property sector and its banking sector. This very definitely will negatively impact the employment market in Spain. Zapatero should feel lucky he was re-elected last year or he too would soon find himself unemployed.

Just published on Wall Straits Journal In Spain, Crisis Stays Low-Key‎

• By JONATHAN HOUSE
  
  MADRID—Spain's worsening financial crisis remains a strangely low-key affair. One in five people here are out of work, but generous unemployment benefits, strong family support networks and a bustling informal economy are helping maintain people's lifestyles. Bars and restaurants in the city center are doing brisk business.
  
  "It seems to me the situation here is less bad than in Greece," says Manuel Herrera, a 30-year-old Peruvian immigrant, who has seen the recent images of angry mobs protesting in Athens. "Here in Spain, the crisis is not so noticeable: People still go out for beers, to buy cigarettes, whatever."
  
  But the Asian-restaurant chain he works for as a cook has closed down four of its 12 restaurants, and Mr. Herrera says he sees a sense of hopelessness setting in that could point to prolonged economic stagnation.
  
  "The Spanish were not ready for this crisis," he says. "The situation's not getting any worse, but it's not getting any better either."
  
  For years, Spain was one of the euro zone's biggest success stories. Membership in the common currency in 1999 brought historically low interest rates that fueled a credit and construction boom, which transformed the country into one of Europe's chief growth engines. Through 2007, Spain created more than one-third of all euro-zone jobs and absorbed four million immigrants.
  
  The global financial crisis brought that crashing down. Spain is grappling with 20% unemployment and a double-digit budget deficit that threatens to land the country in a Greek-style financial crisis.
  
  Though the government expects the economy to return to growth in the first quarter, that follows contractions in six consecutive quarters.
  
  On Wednesday, Standard & Poor's cited low growth prospects resulting from mounting banking-system stress, high household debt levels and low export capacity as primary factors behind its decision to downgrade Spain's sovereign debt.
  
  Thirty-year-old Eduardo lost his job as a computer programmer a year ago and says many of his friends are also out of work. He still isn't ready to take just any job: "There are jobs out there, but most of them don't pay to well, or they require higher levels of experience."
  
  Until recently, the government of Socialist Prime Minister José Luis Rodríguez Zapatero has focused on anticrisis measures to cushion the pain of the unemployed by extending benefits, cutting taxes and taking measures to create short-term jobs for construction workers. It has gone to great pains to maintain good relations with unions.
  
  But the government has changed gears amid mounting pressure from international investors to show it can pull the economy out of the doldrums and get its debt levels back on a sustainable path. It has announced plans to cut the public-sector wage bill, push back the retirement age and reform Spain's rigid labor market. The plans are vague thus far and have yet to ruffle many feathers.
  
  The government is counting on a quick agreement on a support package for Greece to contain the euro-zone financial crisis and buy Spain more time to get its fiscal house in order. In an interview, Deputy Finance Minister José Manuel Campa said Spanish bond spreads have been blown out to "exceptional" levels that he believes are temporary. "Considering that they have been affected by the Greek situation, the sooner it is resolved, the better," he said.

Worth reading: No Wonder the Eurozone is Imploding