Spain feels jobless pain
News Article Date: Thursday 05th of February 2009
Spanish unemployment hit its biggest ever monthly rise in January, according to the country's Labor Ministry.
Unemployment rose by 199,000 last month, or 6.0%, bringing the total to 3.3 million, the highest jump on record since Spain started using its current method for recording ranks in 1996.
Over the past year, unemployment has reached more than 1.0 million, and at 14.4%, the country's rate is the highest in the European Union. Spanish unemployment by far exceeds jobless rates in other E.U. countries with the Netherlands' rate of 2.7%, the U.K.'s 6.1% and France's 7.9%, according to the E.U.'s statistics office Eurostat.
"We continue to be affected by the serious international financial crisis, the lack of liquidity and the fall in consumer spending," said Maravillas Rojo, Spain's employment secretary.
Analysts have warned things could get worse. Martin Van Vliet, a senior economist at ING, expects Spanish unemployment to reach 18.0% by the beginning of 2010. Van Vliet's forecast exceeds that of the European Commission, which expects unemployment levels to increase by 16.1% in 2010 and 18.7% the following year.
"Unemployment is posing a major threat to the ailing housing sector," Van Vliet said. "Once people lose their jobs, it becomes difficult to get a job and then they struggle to service their monthly mortgage payments."
Spain's property sector has been one of the worst hit during the current subprime mortgage crisis with home builders filing for administration as prices fall and buyers are unable to secure financing. Last year, Martinsa Fadesa was one of many companies to go bust as it struggled to raise funds and meet debt payments.
"The danger is that the surge in unemployment could feed back into an even steeper downturn in the housing crisis," said Van Vliet. You could end up in a situation where people won't be able to retain their homes and this would put more pressure on the market. The government needs to break the vicious cycle very quickly."
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