IMF Calls for Urgent Steps on Spain Unemployment
Total Debt: 614,728,249,964 €
Interest per year: 32,522,707,994€
Population: 46,240,000
GDP: 820,053,993,885€
Interest per second: 1,031€
Citizen's Share: 13,294€
Debt as % of GDP: 74.96%
United States' National Debt:
Total Debt: $ 16,561,428,740,817
Interest per year: $392,629,847,030
Population: 314,500,000
GDP: $15,585,600,000,000
Interest per second: $12,450
Citizen's Share: $52,660
Debt as % of GDP: 106.26%
IMF calls for urgent steps on Spain unemployment
June 19, 2013AP - Spain faces the prospect of of high unemployment and sluggish growth lasting years unless the country and Europe take "urgent action" to slash the nation's crippling 27 unemployment rate and free frozen credit to businesses so they can expand, the International Monetary Fund said Wednesday.
A report issued by the IMF praised Spain's reforms for stabilizing an economy that almost imploded last year, particularly by propping up public finances, but said the jobless rate is "unacceptably high and the outlook difficult."
After years of recession, Spain will probably start growing economically at the end of this year and into next year but the growth may not be enough to bring down the unemployment rate, said James Daniel, the IMF mission chief for Spain.
"The uncertainty is whether the recovery will be strong enough to generate jobs," Daniel told reporters.Spain has been in recession for most of the past four years following the collapse in 2008 of its once-booming real estate sector. Concerns over its public finances, drained as the government tried to spend its way out of the financial crisis, have also piled the pressure on the government to rein in spending.
The country narrowly avoided taking an international bailout like those accepted by Greece, Ireland and Portugal. But it did receive permission last year from a European-funded program to tap as much as 100 billion euros ($133.74 billion) to save ailing lenders, and has taken 40 billion euros so far.
The IMF said it expects Spain's economy to grow about 1 percent a year over the next five years with "limited gains in employment."
The organization went on to compliment Spain for restoring credibility to its economic policies through a series of harsh and unpopular austerity measures imposed last year by Prime Minister Mariano Rajoy. These raised taxes and cut cherished government services like education and national health care.
But it said Spain "needs to deliver on its announced program, and indeed go further in some areas. The focus should be on a pro-jobs strategy that allows the economy to grow and hire."
The unemployment rate is among the highest in the 17-nation eurozone, and joblessness for Spaniards under age 25 is 57 percent. Many young and highly educated Spaniards have emigrated in recent years or are seriously considering doing to because the outlook is so bad for jobs. Top destinations include Britain, Germany and Latin America.
The IMF report also urged Spain to embark on more labor reforms for job generation after Spain already passed a host of measures last year making it easier and cheaper for companies to hire and fire workers. Among the other measure the report recommended were for companies to be more flexible with setting shifts, more collective bargaining reforms and further reductions on severance pay following dismissals.
"Spain needs to generate jobs and that probably means more flexibility on wages going forward," Daniel said.
Spain is running out of people to borrow from after raiding its own pensions piggy bank
Quartz - The Spanish government has been quietly and aggressively draining its pension guarantee program to buy its own bonds (paywall),
reports the Wall Street Journal, potentially putting future pension
payouts at risk.
The government has tapped the Social Security Reserve Fund so many times—€4 billion ($5.3 billion) to cover pensions last November and another €3 billion to pay for “unspecified treasury needs” in September, as examples—that government has had to raise the annual legal limit on emergency withdrawals. Currently, some 90% of the €65 billion fund has gone into risky Spanish debt, says the WSJ.
Setting aside the alarming depletion of social security reserves, as well as the question of whether forced lending in one’s domestic market is a great use of capital, the more pressing worries are where the government will turn next in an emergency, as a recession continues and austerity measures continue to bite; and who exactly will buy the estimated €207 billion in debt the Spanish government plans to issue this year.
Spain isn’t the only country to tap its pension fund reserves to buy its own debt. Governments in Italy and France have done the same to keep themselves afloat. But economist Paul Donovan of UBS says Spain’s situation is more precarious, because it has fewer resources.
Mired in recession, the Spanish government can only generate so much revenue. The nation is borrowing instead from its own economy, but this has its limits. While Italians are relatively wealthy, Spaniards—who were under authoritarian rule from the mid-1930s until the mid-1970s—are not.
Donovan says that unlike in Italy, where he estimates private sector wealth at more than 400% of GDP, or more than three times the national debt, in Spain it is more like 150% of GDP, or one-and-a-half times the national debt.
Commercial banks have already substantially increased their sovereign bond holdings, and though they have no interest in seeing Spain’s economy tank, they already own about a third of the government debt in circulation.
And non-Spanish buyers are losing interest in Spanish bonds; at least, that was the case in December, when a disappointing sovereign bond auction left the market speculating about an international aid request.
Spanish officials have, reports the WSJ, defended using the pension reserve fund to buy high-risk bonds, saying it works as long as Spain can keep tapping financial markets until the debt crisis eases and the economy recovers.
We’ll have some idea how well that strategy might pan out at its first public debt auction of the year, scheduled for next week. If it doesn’t go well, an international bailout could be just around the corner.
The government has tapped the Social Security Reserve Fund so many times—€4 billion ($5.3 billion) to cover pensions last November and another €3 billion to pay for “unspecified treasury needs” in September, as examples—that government has had to raise the annual legal limit on emergency withdrawals. Currently, some 90% of the €65 billion fund has gone into risky Spanish debt, says the WSJ.
Setting aside the alarming depletion of social security reserves, as well as the question of whether forced lending in one’s domestic market is a great use of capital, the more pressing worries are where the government will turn next in an emergency, as a recession continues and austerity measures continue to bite; and who exactly will buy the estimated €207 billion in debt the Spanish government plans to issue this year.
Spain isn’t the only country to tap its pension fund reserves to buy its own debt. Governments in Italy and France have done the same to keep themselves afloat. But economist Paul Donovan of UBS says Spain’s situation is more precarious, because it has fewer resources.
Mired in recession, the Spanish government can only generate so much revenue. The nation is borrowing instead from its own economy, but this has its limits. While Italians are relatively wealthy, Spaniards—who were under authoritarian rule from the mid-1930s until the mid-1970s—are not.
Donovan says that unlike in Italy, where he estimates private sector wealth at more than 400% of GDP, or more than three times the national debt, in Spain it is more like 150% of GDP, or one-and-a-half times the national debt.
“If Italy wants to mobilize domestic savers to buy bonds, it only has to convince one in three people,” he says. “If Spain wants to get domestic savers to buy bonds, it has to pretty much convince all of them.”So where can Spain turn next? It has nearly exhausted secret sources of cash like the Social Security Reserve Fund. And indeed, says the WSJ, using those reserves to buy its own bonds likely violated a rule to buy securities only “of high credit quality and a significant degree of liquidity.”
Commercial banks have already substantially increased their sovereign bond holdings, and though they have no interest in seeing Spain’s economy tank, they already own about a third of the government debt in circulation.
And non-Spanish buyers are losing interest in Spanish bonds; at least, that was the case in December, when a disappointing sovereign bond auction left the market speculating about an international aid request.
Spanish officials have, reports the WSJ, defended using the pension reserve fund to buy high-risk bonds, saying it works as long as Spain can keep tapping financial markets until the debt crisis eases and the economy recovers.
We’ll have some idea how well that strategy might pan out at its first public debt auction of the year, scheduled for next week. If it doesn’t go well, an international bailout could be just around the corner.
