Bloomberg News

Spanish Third-Quarter Unemployment at Highest in 15 Years

October 28, 2011

(Updates with job-loss data in fifth paragraph.)

Oct. 28 (Bloomberg) -- Spanish unemployment rose to a 15- year high of more than 21 percent, the most in the euro area, as government austerity measures undermine the recovery in the region’s fourth-largest economy.

Joblessness increased to 21.5 percent in the third quarter, the National Statistics Institute said today in Madrid. Consumer prices gained 3 percent in October from a year earlier after increasing 3 percent in September, the INE said in a separate report.

The last time unemployment rose to this level, in 1996, Spain’s Socialists lost to the opposition People’s Party, which polls indicate will win a general election on Nov. 20. The PP would face the challenge of spurring an economy crimped by failing domestic demand and tackling the euro region’s third- largest budget deficit to keep Europe’s sovereign-debt crisis at bay and stem a surge in borrowing costs.

“This forebodes a very negative macroeconomic scenario for the second half of the year,” said Jose Luis Martinez, a strategist for Spain at Citibank in Madrid. “The poor performance of jobs in the services sector and of part-time contracts is particularly striking given the tourist season.”

Deputy Finance Minister Jose Manuel Campa blamed the increase on austerity measures taken by regional governments. Public administrations cut 40,200 jobs in the quarter, Labor Minister Valeriano Gomez told a news conference today. Around 43,000 domestic-service jobs were also lost, and the building industry continued to shed workers, he said.

Excess Homes

The ruling Socialists lost support last year after imposing the deepest deficit cuts in at least three decades on an economy still reeling from its worst recession in six decades. The PP may win 194 seats in the 350-seat Parliament, compared with 119 for the Socialists, an opinion poll published by El Mundo newspaper showed on Oct. 23.

Spain is working through an excess of 700,000 unsold homes after a decade-long building boom collapsed, sparking a three- year slump that has pushed up unemployment. The government says it may miss a target for 1.3 percent economic growth this year, when it forecasts debt will rise to 67 percent of gross domestic product, almost double the 2007 level.

Alfredo Saenz, chief executive officer of Banco Santander SA, said yesterday that the ratio of bad loans to total lending is likely to go up to as much as 5.8 percent in the second half of next year from 5.1 percent now, as real-estate losses rise “like an arrow.” Santander’s default ratio on real-estate lending surged to almost 25 percent in September from 11.1 percent in December 2009.

‘Challenging’ Conditions

Vodafone Group Plc, the world’s largest mobile-phone company, reported slowing service-revenue growth for the fiscal first quarter on July 22, citing “challenging” conditions in southern Europe. Italy and Spain are the second- and third- biggest markets for the company after Germany.

Spain’s quarterly growth will remain similar to the April- June period’s 0.2 percent pace for the rest of the year, Prime Minister Jose Luis Rodriguez Zapatero said on Sept. 14. The International Monetary Fund predicts an economic expansion of 0.8 percent this year.

--Editors: Eddie Buckle, Jeffrey Donovan

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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