The 17-country euro zone is back in recession for the second time in four years, but in Spain and elsewhere it feels more like a depression.
Ricky Singh came to Spain from his native India in search of better times, but now he’s thinking of heading home after an achingly long bout of joblessness in Barcelona, site of mass anti-austerity protests this week.
“I have had no work for two to three years,” complained Mr. Singh, who found ample work as a painter during the boom years. “Maybe I’ll go back to India to find work.”
In some parts of Barcelona, such as the immigrant neighbourhood of El Raval, the number of residents without work is thought to be as high as 60 per cent. Here, some residents haven’t worked since Spain’s property bubble burst in 2007 and 2008, surviving on the generosity of friends and meagre government unemployment benefits.
Gross domestic product in the euro zone shrank 0.1 per cent in the third quarter, compared to the second quarter, according to figures Thursday from Eurostat, the European Commission’s statistical agency. Combined with a 0.2-per-cent contraction in the second quarter, the slump meets the traditional definition of a recession – two consecutive quarters of negative GDP.
Strip out Germany – the manufacturing and exporting engine of Europe – and the results are even worse. The euro zone would be in its fifth quarter of contraction without Germany.
The countries hit hardest by the debt crisis – Greece, Spain and Portugal – may be facing a full-blown depression, exacerbated by tough austerity measures such as tax hikes and wage cuts. In both Spain and Greece, the jobless rate is now above 25 per cent, or more than twice the euro zone average.
The most dramatic decline among the euro zone’s members was seen in the Netherlands, whose economy contracted 1.1 per cent from the previous quarter.
Germany and France were the only countries to report GDP growth in the three months ended in September – 0.2 per cent in both cases. But growth is stalling there, too.
Economic output in the euro zone is now 2.4-per-cent lower than the peak it reached just before the last recession in 2008.
The outlook for the next few months is more of the same. National Bank of Canada economist Krishen Rangasamy said “odds are” the recession will stretch into the current quarter as well.
“The periphery economies continue to struggle as austerity bites into growth,” Mr. Rangasamy said in a research note. “Worse is the trend line … which makes it even harder for those economies to meet deficit targets and reduce debt.”
Economists warned that the third-quarter figures could eventually be revised lower.
The rising euro zone jobless rate is one of the main factors behind the region’s double-dip recession.
In September, the unemployment rate reached 11.6 per cent, the highest on record, according to Eurostat. Youth unemployment reached 23.3 per cent, up from 21 per cent a year earlier.
The regional figures mask horrific jobless numbers in some countries, most on the Mediterranean frontier. In Spain, the number without jobs has reached 25.8 per cent, even higher than Greece and the highest in the Western world. Spain’s youth jobless rate is 54 per cent.
Economists expect Spain to keep losing jobs as austerity measures deepen the recession, and government and construction jobs continue to vanish. Spanish financial consultants AFI expects the unemployment rate to his 26.6 per cent in 2013. AFI says that 10 per cent of Spanish households have no family members with employment.
At a government employment office in central Barcelona, Bibiana Perez Gasco, 31, is finding it impossible to get work that lasts more than a few weeks. “There are 6 million people looking for work in Spain,” she said. “I look in bars, shops, supermarkets – nothing.”