Austerity and Secession

BERLIN/MADRID (Own report) – The escalating Catalan secessionist conflict is upsetting Spain, a country hard hit by Berlin’s austerity dictate. Spain – occasionally praised in German media as a showcase for an alleged successful austerity policy – is still confronted with enormous social and economic problems, in spite of a modest economic growth. Unemployment and poverty remain at high levels. Crisis policies over the past few years have also increased the economic gap between Spain and the euro zone’s centers of prosperity. One still cannot speak of debt reduction – the official objective of Germany’s austerity policy within the EU. The poor economic situation, the high debt burden level and the distribution of federal and regional debts are fueling Catalonia’s secessionist conflict.

Poverty as New Normalcy

Spain still has not recovered from the socio-economic one-two punch the country was delivered over the past few years by the global financial crisis followed up by Berlin’s austerity dictate. The country still holds one of Europe’s bottom positions, in terms of many social and economic factors, nearly a decade after the outbreak of the global economic crisis, in the course of which, the real estate sector crashed, after its speculation-fueled bubble burst. In spite of a 3.2 percent economic growth in 2016 – forecast this year to be about 2.8 percent – the official mass unemployment rate in Spain is over 18 percent, with the youth unemployment rate even twice as high. The slight decrease in unemployment, which had risen to nearly 25 percent during Spain’s recession, is partially due to emigration of around 1.7 million foreign workers, who had been employed in the construction sector, at the peak of Spain’s real estate boom. It is, however, particularly due to the emergence of precarious employment conditions with gross salaries at 900 euros and mainly temporary employment contracts.[1] Nearly 27 percent of the population is at risk of poverty and social marginalization. The deep economic crises, that Spain’s conservative government had been trying to overcome by implementing Germany’s former Finance Minister Wolfgang Schäuble’s strict austerity measures, has severely exacerbated the country’s social division. The income ratio of the top 20% to the bottom 20% is now at 7.5, which is the third worst in the European Union. According to the IMF, Spain will have overcome the crisis by 2019 and yet, according to its prognosis, the unemployment rate would still be at 16 percent.[2]

Falling Further Behind Germany

Structural problems in the Spanish economy are also causing the Iberian Peninsula appreciable difficulties in inner-European competition with the dominating German export economy. Spain’s companies are falling further behind at the international level, currently holding last place among the countries of the Organization for Economic Cooperation and Development (OECD). The production level of Spain’s economy had stagnated throughout the crisis years. Between 2008 and 2015, there was no progress in productivity, while spending for research and development in Spain’s industry – comprised primarily of small enterprises – had long since fallen below the EU average. The gap in productivity between Spain and the German euro zone center is growing steadily. The past few months’ modest economic recovery was generated mainly by tourism, the low wage level – which significantly slumped in the course of the crisis – as well as the massive expansion of precarious employment conditions. Moreover, the Spanish educational system, which has been gutted by years of austerity policies, is hardly capable of providing adequate training opportunities. Some 20 percent of Spain’s employees under the age of 25, only completed lower secondary or secondary education, without further qualifications – a European all-time low.[3]

Smoldering Debt Crisis

Debt in the Conflict over Secession

Full article: Austerity and Secession (German Foreign Policy)

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