Spanish society in freefall...

Spain currently has a mass unemployment rate of 24.1% and youth unemployment rate (15-24 y/o) that exceeds 50%, up from 18.2% in 2007.  In comparison Italy's youth unemployment is 29%; Portugal is 30%; and 24% of young people in France are without employment.  The Spanish economy has been contracting each of the past two quarters and is officially back in recession.  As the financial sector attempts to wade through the morass of over-development, massive consolidation of the banks and the crippling of credit has occurred.

The root cause of much of this disaster lies in the corrupt nexus between local bankers and regional politicians, which happen in many instances to be one and the same.  Lax lending standards, cheap foreign labor, and easy inflows of European capital all lead to a massive over-development.  The days of cheap credit ended with the financial crash of 2008.  Private debt was absorbed by the balance sheets of the state and ultimately the collective nations of the Eurozone.

Whereas the chicanery that lead to this bloody mess is a story that needs to be told, I'm interested today in discussing the impact on real people and the current generation of people who will have to pay for this economic catastrophe for the rest of their lives.  The decline and hopelessness felt across Spain has been chronicled in a number of newspapers and journals.  Here are some of the highlights.

In the Spanish daily La Pais, a 9-March article titled Generation Nimileuristra described the lives of young people who see opportunities denied and their lives stagnating with either low or no paying jobs.  

In 2005 youth unemployment was about 20%. Now [reaching] 50% while doubling the European average (22.4%) . The best educated generation has the worst outlook since the transition and feels a victim of the excesses of others...

In Spain there are 10,423,798 people between 18 and 34... Their average net income (including the unemployed), is 824 euros per month. And those who are working earn on average 1,318 euros a month (data from the Youth Council of Spain)...  Professions that seemed safe... are not. The Polytechnic University of Valencia followed the first steps in the process of engineers and architects who graduated in 2008: one in four did not reach [jobs with salaries over 1000 euros/month]. And what is worse: the [educated with jobs with salaries under 1000 euros/month] had advanced by 8% compared to graduates a year earlier.

In many cases youth are forced to abandon independence and relocate into their family's homes.

It has been established that even small levels of protracted unemployment in developed countries can have serious implications for the unemployed.  Those include reduced lifetime wages, reduced employment opportunities, and higher mental health issues.  With respect to society at large, depressed wages will promote educated youth emigrate to other jurisdictions, resulting in a brain-drain to the nation.  Undereducated and unemployed male youth on the other hand are statistically more likely to participate in criminal activity.

In many OECD countries the unemployment rate is substantially higher than the general population. An Economist article from Sept-11, 2011 discusses the various disadvantages and impacts under-employment and unemployment will have on these people.

Unemployment of all sorts is linked with a level of unhappiness that cannot simply be explained by low income. It is also linked to lower life expectancy, higher chances of a heart attack in later life, and suicide. A study of Pennsylvania workers who lost jobs in the 1970s and 1980s found that the effect of unemployment on life expectancy is greater for young workers than for old. Workers who joined the American labour force during the Great Depression suffered from a persistent lack of confidence and ambition for decades.

The implications of this situation are severe.  Not only will youth not be entering the work force, they will not be participating in the economy and doing normal things, such as buying cars, homes, furniture. So there is a negative cascade felt across the nation on all levels. Secondly, since they will not be paying taxes, who will bear the burden of maintaining the welfare state that Europeans are so proud of?   As fewer people are contributing to these pay-as-you-go programs, older generations will see a reduction in benefits.

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The financial crisis has lead to governments across Spain to drastically cut programs, services, and cash transfers to lower levels.  A New York Times article elaborates:

Just as Spain’s national and regional governments are struggling with the collapse of the construction industry, overspending on huge capital projects and a pileup of unpaid bills, the same problems afflict many of its small towns.

One town's mayor discusses his small community's problems:

“We lived beyond our means,” Mr. García said. “We invested in public works that weren’t sensible. We are in technical bankruptcy.” Even some money from the European Union that was supposed to be used for routine operating expenses and last until 2013 has already been spent, he said.

The banking upheavals have brought similar troubles to small and medium scale businesses, which represent "60 percent of the economy, and 80 percent of the jobs".  The vicious cycle has resulted in the shuttering of more than 500,000 small business according to the NY Times.  

“The cuts in credit have been so abrupt that some businesses not only lost specific projects they were working on,” said Carlos Ruiz Fonseca, the director of economy and innovation at Cepyme, Spain’s association of small and medium-size companies. “Some companies have just gone out of business.” 

How is any of this supposed to engender confidence in the international markets?  The same banks which are cutting credit lines, reducing exposure to risk, and contracting their businesses are simultaneously being downgraded by the various credit agencies.  Billions of Euros are being requested by the financial sector to keep these debt ridden entities from further collapsing and imploding the entire Spanish economy.

The net result of all these events is a society that is in freefall.  If these trends continue, not only will Europe have generated legions of angry, unemployed persons, they will have created the same foundations that gave rise to the extremists of the last century.

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Update: video link about squatters taking over an vacant apartment complex, built during the construction boom, in Seville