Europe February 8, 2010, 1:38PM EST

Rising Job Losses Choke Spanish Recovery

Plagued by economic decline and high public debt, Spain can't rebound as long as unemployment—which could hit 20% this year—keeps getting worse

Story Tools

High above the Andalusian city of Granada in the mountain village of Altos de la Zubia lies a network of some 10km of perfectly tarmacked roads, roundabouts, street lights, pedestrian crossings and playgrounds. Just one thing is missing from this gigantic housing estate: houses.

Rather than pavements, the pedestrian crossings run into masses of tumbleweed; the swings and slides are rusting; the roundabout spurs lead nowhere. Perhaps 5 per cent of the building plots have dwellings – the rest is bare earth. The silence is deafening.

On the opposite side of the Granada valley, gleaming in the Andalusian sunshine, are the service roads of a huge industrial estate. But there are no buildings beside them.

These sprawling roads to nowhere are like high tide marks from Spain's economic heyday of the early Noughties. But then it all started to go terribly wrong – and the country's workforce is paying the price.

As Spain has plunged into its worst economic crisis since the 1950s, unemployment has rocketed by nearly two million in two years – and last week it passed the landmark total of four million. That's 18.8 per cent of Spain's workforce, the worst figures since records began in 1964, the highest jobless total in Western Europe, and second only to Latvia in the entire continent.

The latest figures still have the power to shock. The Spanish government, already accused of poor economic policies by an estimated seven out of 10 Spanish businesses, has taken the brunt of the blame amid that fears that it is the next country after Greece facing default on its debt.

Under a photo of Finance and Economy Minister Elena Salgado, in Spain's most influential newspaper El País, the headlines thundered: "She's got four million, three hundred and twenty six thousand, five hundred problems to solve." And she may have more.

An estimated 44 per cent of Spanish business will shed workers before July and one government minister has admitted 20 per cent unemployment is now possible. The once incredible spectre of five million unemployed is nearly a reality.

With more than a million – 26.3 per cent of the workforce – in its dole queues, Andalusia has the dubious honour of being the region in mainland Spain with the highest level of unemployment. However, its difficulties would sound familiar to almost any Spaniard.

"Andalusia's main economic motors were service industries and construction," says Granada-based financial consultant Julio Alvarez. "But the building industry, here and throughout Spain, is facing total meltdown.

"Since 2008, 50 or 60 per cent of my work comes from the courts, concerning businesses going into administration – 90 per cent construction companies. New technology companies are the least affected overall, but there are no green shoots. Not in Andalusia."

The facts back up Alvarez's dramatic claim: while new requests for planning permission in Granada have plunged to 1960s levels, since 2007 unemployment has tripled.

Construction has been the worst hit: in 2009, the number of workers in Granada's building sector dropped from 42,800 to 26,100. As for Spain in general, 970,000 building workers have lost their jobs since late 2007, just below 50 per cent of the total unemployment increase.

"I've made 80 job applications since being made redundant in December 2008," says Granada-based architectural technician Miguel Reyes Aguado, "but there have been no answers. I'm not the only one with this problem, it's all fathers on the school run each morning, too. "There are a few job offers in Madrid, but at rates they paid in Granada 12 years ago."

Miguel and his wife Louise, who also recently lost her job, want to emigrate to the UK or Canada, "where the economy's on the upturn".

"Not yet though: we've dropped our house price several times, but it's still not selling."

Given the employment situation, the Spanish predilection for fixed-term contracts – of which there are 41 per cent fewer compared with 2007, and which constitute just 9 per cent of new jobs – has become an obsession.