WSJ - Spain Largely Avoids Unrest Even as Economy Slumps

[Alatriste]

http://online.wsj.com/article/SB124139642920281859.html


Spain Largely Avoids Unrest Even as Economy Slumps

By THOMAS CATAN

Madrid

Spain's unemployment rate has topped 17%, and economists expect it to hit 20% next year. But Depression-era scenes don't dot its landscape.

Spaniards aren't, en masse, sleeping under bridges. Tent cities haven't sprung up outside Spanish towns. Labor has yet to call a single major strike.

Europeans are notoriously quick to take to the streets to defend their economic interests. Yet, as the Continent endures its worst economic crisis since the end of World War II, things seem unusually calm.

Even Friday's May Day marches were more muted than expected. Though hundreds of thousands of people across Europe took part in the annual demonstrations, calling on governments to support jobs and workers, overall participation was less than unions had hoped for, considering the severity of the downturn.

Exact reasons for the subdued mood vary from country to country, but a common theme emerges: The very factors that make some European economies sluggish and inflexible during times of plenty also help cushion the impact of the downturn.

Spain exemplifies this. During the good times, its economy is held back by low productivity, an extensive underground economy and scant labor mobility. Studies show that Spaniards are unusually reluctant to move away from their home region -- a trait that acts as a drag on the economy.

Today, however, being close to one's extended family is a lifeline. Members of Spanish families help one another pay the mortgage, so there are fewer foreclosures. Even when they lose their homes, Spaniards rarely end up on the street. For the most part, they move in together.

"The family represents kind of a social-welfare network that allows the country to withstand a much higher rate of unemployment," says Rafael Doménech, chief economist for Spain and Europe at BBVA bank.

Then there is the question of who would lead any unrest. The huge job losses in Spain have been borne almost entirely by temporary workers -- women, immigrants and the young -- who aren't represented by anyone. The types of workers who tend to belong to labor unions -- middle-aged men on full-time contracts -- have scarcely been touched by layoffs. In fact, the latest jobs report showed they had slightly increased their number in the first quarter of the year -- even as 800,000 temporary and self-employed workers lost their jobs.

Another issue Spain shares with other southern European countries is its extensive black economy. During the good times, economists have encouraged countries like Spain and Italy to bring the black market under control. In the bad times, however, that market can give many Spaniards secret, undeclared sources of income that can keep them afloat.Analysts say it could represent as much as one-fifth of the Spanish economy, providing work for people who are formally unemployed.

Most mainland European nations are also simply more accustomed to living with high unemployment. Even at the height of Spain's credit-fueled boom, with an overheated economy running at full tilt, the country's unemployment rate fell only to 8%.

Given the rigidities of its labor market, the country's "natural" rate of unemployment is far higher than that of other countries. Economists at Spain's BBVA bank put the country's so-called Nairu -- the sustainable rate of unemployment that can be reached without the economy overheating -- as high as 14%.

Spanish police had braced for violence during Friday's May Day marches. But just 6,000 people turned out for the parade in Madrid, according to Spanish police, in a largely good-natured event that featured samba dancing, not Molotov cocktails. Other Spanish cities also drew relatively small crowds.

In Germany and France, demonstrations attracted more people than last year. But Germany has seen little other sign of widespread protest or labor unrest. In France -- synonymous in many people's minds with revolution -- Friday's marches drew fewer people than a general strike two months ago. The country's biggest unions said over the weekend that they weren't planning to organize another strike right away lest they plunge the country into chaos. Overall, other than a few boss-nappings and some local protests, things have been reasonably tranquil.

A notable exception since the global economic crisis began is Greece, where one-fifth of people live below the poverty line. There, hundreds of youths clashed with police over four days of rioting in December, underscoring frustration over the high youth-unemployment rate.

Spain last suffered an unemployment rate of 17% only a decade ago, following the recession of the early 1990s. In the early 1990s, it regained growth by devaluing its currency. Now that it uses the euro, it no longer has that option. The only way it can make its wrenching economic adjustment is by shedding jobs.

Spain has no obvious industry to pick up the slack now that the country's bloated construction sector has collapsed. Because of its onerous labor laws, employers will wait a long time to hire, even when a recovery begins. And the Socialist government has made it clear it has no intention of overhauling labor laws.

The idiosyncrasies of European economies have so far permitted governments to take a more laid-back approach to fighting the downturn than, say, the U.S. But if the recession drags on, their people's patience will be tested. Then, Greece's riots could become the rule, rather than the exception.





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I will only comment that the article should have put less emphasis on the rigidity of labor markets and more emphasis on two things, the role of black economy and the number of housewives (and some "househusbands") that report being unemployed when in fact they aren't really interested or looking for a job but they want state help for kindergarten, schools, etc.

Without those two factors one faces a contradiction of epic proportions: with unemployment over 8% Spain needed to import 5,000,000 foreign workers in the last 8-10 years...

The rigidity of labor markets should be reduced IMHO, but saying that soaring unemployment is due to this problem just is no good enough. Those workers fired, rouhgly 1,000,000, did work in sectors (housing, turism, services... ) in which temporary contracts were the norm. In other words, the problem is not so much rigidity but the excessive dependence from turism (the housing boom was very much related with turism). It brings millions of jobs, yes, but low productivity, low salary, highly seasonal jobs, and very vulnerable to slumps too.

[The Larch]

Because of its onerous labor laws, employers will wait a long time to hire, even when a recovery begins.

Jeez, experts sure are obsessed about making firings even cheaper.

[Alatriste]

Because of its onerous labor laws, employers will wait a long time to hire, even when a recovery begins.

Jeez, experts sure are obsessed about making firings even cheaper.

I think it's because those experts are used to working with models, and models in which data are always reliable and true. Their models say that unemployment in the best of times was over 8% (you and I know that, quite simply, wasn't true) and in consequence the only explanation consistent with theory is a labor market incredibly rigid.

[The Larch]

Because of its onerous labor laws, employers will wait a long time to hire, even when a recovery begins.

Jeez, experts sure are obsessed about making firings even cheaper.

I think it's because those experts are used to working with models, and models in which data are always reliable and true. Their models say that unemployment in the best of times was over 8% (you and I know that, quite simply, wasn't true) and in consequence the only explanation consistent with theory is a labor market incredibly rigid.

I personally prefer to blame pin headed cheap ass short sighted employers as responisble for most woes of the Spanish labour market. 

[Iormlund]

It is also a fairly stupid assertion. Employers risk nothing by hiring as soon as work picks up. They can always sack those hired for nothing at all months alter.

[DisturbedPervert]

Tent cities haven't sprung up outside Spanish towns.

I guess that only happens in America.   

[Berkut]

Because of its onerous labor laws, employers will wait a long time to hire, even when a recovery begins.

Jeez, experts sure are obsessed about making firings even cheaper.

I think it's because those experts are used to working with models, and models in which data are always reliable and true. Their models say that unemployment in the best of times was over 8% (you and I know that, quite simply, wasn't true) and in consequence the only explanation consistent with theory is a labor market incredibly rigid.

I personally prefer to blame pin headed cheap ass short sighted employers as responisble for most woes of the Spanish labour market. 

\
True - they should get some unions, in order to fix the woes of the labor market.

[Barrister]

I personally prefer to blame pin headed cheap ass short sighted employers as responisble for most woes of the Spanish labour market. 

Sarcasm?

[Zanza]

While the article is correct in saying that Germany didn't experience widespread unrest (yet?), the traditional May Day street battle between hooligans and police in Berlin-Kreuzberg was particularly fierce this year.

Some of the hooligans probably didn't enjoy it that much...

[The Larch]

Because of its onerous labor laws, employers will wait a long time to hire, even when a recovery begins.

Jeez, experts sure are obsessed about making firings even cheaper.

I think it's because those experts are used to working with models, and models in which data are always reliable and true. Their models say that unemployment in the best of times was over 8% (you and I know that, quite simply, wasn't true) and in consequence the only explanation consistent with theory is a labor market incredibly rigid.

I personally prefer to blame pin headed cheap ass short sighted employers as responisble for most woes of the Spanish labour market. 

\
True - they should get some unions, in order to fix the woes of the labor market.

We already have more than enough unions, thankyouverymuch.

[The Larch]

I personally prefer to blame pin headed cheap ass short sighted employers as responisble for most woes of the Spanish labour market. 

Sarcasm?

Up to a certain point, yes. 

[The Brain]

German riot police are cool. I saw some up close back in 95. One of the female ones could have controlled my crowd anytime.

[MadImmortalMan]

Unrest? It's a recession, not a civil war.

[PDH]

Spain sucks, in the USA we are already living in tent cities and eating at soup kitchens.

[Alatriste]

Unrest? It's a recession, not a civil war.

Well, it's the WSJ, they probably expected - and still hope for - this

http://1.bp.blogspot.com/_0BoO175xieM/Re4LStPKPyI/AAAAAAAAAxc/vB3Wuf2d_Fw/s320/liberty+guiding+the+people.jpg

or this

http://johnlacny.com/mt-static/images/post-graphics/winter-palace.gif