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Spain's Lost Generation Looks Abroad


Artells took a post in Aix-en-Provence, 200 miles from her hometown in Catalonia

Photograph by Cecile Mella for Bloomberg Businessweek

Artells took a post in Aix-en-Provence, 200 miles from her hometown in Catalonia

Ester Artells’s mother told her that if she worked hard she would go a long way. Growing up in Reus in northern Spain, Artells got the message: A good education would give her the career denied her mother in the straitened economy of General Francisco Franco’s regime. Now, Spain is in an economic slump as severe as anything experienced since the earliest days of Franco. Battered by the sovereign debt crisis, the government has cut deep into its spending—so deep that the economy likely will contract 1.3 percent this year.

And Artells? The 35-year-old biologist has had to move north to France for work she couldn’t find at home. “It was clear to me as soon as I finished my thesis I’d be packing my bags,” says Artells, who found a research post at the University of Aix-Marseille after completing her doctorate last year. “For my mother, it’s very difficult. Everything we’ve fought for since the dictatorship is being wrecked.”

Across Europe, parents who assumed that after World War II each generation would be better off than the last are watching the debt crisis sweep aside those certainties. Greek teachers and state workers no longer have jobs for life, students at British universities face U.S.-style tuition, and the French have had to join other Europeans in retiring later. Politicians across the 27 European Union countries are adopting austerity measures that come to about €450 billion ($600 billion), according to data culled from government announcements. “Western European society cannot continue in the way it has been,” says Gabriel Stein, a director at Lombard Street Research, an economic analysis firm. “We have reached a limit to how much can realistically be done through the public sector.”

Spain embodies the great sacrifices governments and citizens must make to reconfigure Europe. The Spanish government will slash investment spending by 40 percent when it sets this year’s budget on March 30, Economy Minister Luis de Guindos told Parliament earlier in March. There will be a hiring freeze at public research institutions that recruited almost 600 scientists in 2008, according to the Spanish Scientists’ Confederation. That will make it tougher for up-and-coming scientists such as Artells.

Spain aims to trim more than €40 billion from its deficit to curb borrowing costs that reached a 14-year high of 6.7 percent for 10-year bonds in November. If bond traders judge the effort a failure, bond yields will rise again to unaffordable levels, and the government will have to seek a bailout. Then it will be like Greece, with much of its economic sovereignty handed over to the European Central Bank and the International Monetary Fund.

Caught in this downward spiral is Artells’s generation, which is both the best-educated Spain has ever produced and the hardest hit by the crisis. Spaniards in their 20s and 30s have a high school graduation rate of 86 percent, compared with 50 percent for those in their 50s and 60s, according to the National Statistics Institute. After joining the European Union, Spain expanded its educational system, setting up new institutions such as the Universidad Pompeu Fabra in Barcelona, now the country’s top-ranked school. Since 2000 successive governments have emphasized the need to boost capacity in research and development to make companies more competitive. Former Prime Minister José Luis Rodríguez Zapatero aspired to create a “knowledge economy” throughout his time in office from 2004 to 2011, urging students such as Artells to pursue higher education.

Still, younger workers have suffered the bulk of the job losses in Spain. The young mainly landed temporary jobs while older workers were protected by cast-iron contracts that guaranteed jobs for life and lush pensions. Spanish unemployment among people under 25 was 49 percent at the end of last year, according to the International Labour Organization, one of the highest rates in the world. The overall jobless rate was 23 percent, neck and neck with Greece. Some 68 percent of young Spaniards are considering emigrating, an EU survey showed last year. “What can we say to parents who realize that for the first time in history their children will be worse off than them? What can we say?” Spanish Prime Minister Mariano Rajoy asked in a speech in Seville in February.

Artells was born just after the death of Franco, and she grew up along with her country. Her mother had only basic reading skills and worked as a nanny and housekeeper. Franco’s economy, based on agriculture and tourism, was transformed after his death by tighter trade links with Europe and subsidies from Spain’s neighbors to the north. In the last 30 years Spain has produced corporations that rank among Europe’s biggest banks, telecom operators, and construction companies.

Artells worked part-time to support herself through her undergraduate degree and finished her doctoral thesis last July. Her options in Spain consisted of a job as a lab technician or a sales representative for a drug or chemical producer, she says. Instead, she got the university post in southern France studying the toxicity of nano-size particles of titanium and cerium. She earns more than she would for a similar position in Spain, if she could even find one. “I don’t know what happened,” Artells says. “I worked. I went to university. I studied. And now if you want a job, you have to take something totally unrelated to your qualifications, or you have to go abroad. For what have they trained us so much?”

Spain’s mistake, says Rafael Doménech, chief economist for developed countries at BBVA Research and a former adviser to Zapatero, was to encourage the training of researchers before the economy was ready to put them to work. “That strategy was not well designed,” he says. Spain’s economy has less capacity to employ the most-skilled because of its continued high proportion of small companies, despite the rise of a few giants like Telefónica (TEF) and Banco Santander (STD). About 28 percent of jobs in Spain were at companies with fewer than 20 workers in 2006, according to BBVA. These companies generally operate in lower-tech industries. For Greece and Portugal, the same figure was more than 30 percent. For Germany it was only 14 percent. Spain impeded the growth of its companies with rigid labor rules and costly regulation during the boom years. The country ranks 44th on the World Bank’s ease of doing business index, between Puerto Rico and Rwanda.

Prime Minister Rajoy has little time to get the economy moving with his plan to make labor more flexible, overhaul the public sector, and turn Spain into a viable member of the euro zone, says Megan Greene, head of European economics at Roubini Global Economics. “You don’t really get a second shot,” she says. “It’s a long road. It’s questionable whether Spain can do it.” One bright spot: Exports have risen 12 percent since the crisis began in 2008.

Should Rajoy’s reforms succeed in restarting the economy, Spain may enjoy a boost in productivity by tapping the intellectual capital that has been forced abroad, Doménech says. Returning workers will have their international experience to contribute. Artells makes the 200-mile trip back to Catalonia every holiday and suffers a twinge of homesickness when her friends send e-mails to organize spring fiestas. “We’re real family people in Spain,” she says. “I’m not asking for a house with a pool and a 4×4, I just want to be able to think about having a family.”

The bottom line: Austerity cuts worth $600 billion are driving up European unemployment. Spain has the world’s second-highest youth jobless rate as a result.

Sills is a reporter for Bloomberg News.

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