A New High in Spain's Unemployment Rate
Youth unemployment in Spain now exceeds 55%. This is an explosive situation and that may be putting it mildly. What are the idle young people that see no future for themselves going to do? Will they just sit still and meekly collect whatever paltry handouts the insolvent Spanish government can still afford to give them? We somehow doubt it. We expect unrest and demonstrations in Spain to escalate further this year.
We wonder what will happen once it turns out that the government will miss its deficit targets by what is likely to be a huge margin. The EU with its 'fiscal pact' rules will have to turn the thumb-screws even further when that happens, and it is actually doubtful that the plan to let the ECB finance Spain's government by starting the OMT program will go as smoothly as the markets apparently expect. After all, Spain will first have to knuckle under and adhere to an IMF and ESM imposed new and presumably even more severe austerity scheme. Meanwhile the government of prime minister Rajoy is already in all sorts of trouble over burgeoning corruption allegations as Mish recently pointed out.
“Spain's unemployment rate soared to its highest level since measurements began in the 1970s as a prolonged recession and deep spending cuts left almost 6 million people out of work at the end of last year.
Spain's unemployment rate rose to 26 percent in the fourth quarter of 2012, or 5.97 million people, the National Statistics Institute said on Thursday, up from 25 percent in the previous quarter and more than double the European Union average.
"We haven't seen the bottom yet and employment will continue falling in the first quarter," said Citigroup strategist Jose Luis Martinez. Spain sank into its second recession since 2009 at the end of 2011 after a burst housing bubble left millions of low-skilled laborers out of work and sliding private and business sentiment gutted consumer spending and imports.
Efforts by Prime Minister Mariano Rajoy's government to control one of the euro zone's largest deficits through billions of euros of spending cuts and tax hikes have fueled general malaise, further hampering demand. When Rajoy took office in late 2011 there were 5.27 million jobless in Spain.
The economic downturn put an average of 1,900 out of work every day through 2012 and with the recession expected to last at least until the end of 2013, net job creation is unlikely this year. Joblessness has been particularly acute for Spain's youth, with 60 percent of people under the age of 25 unemployed in the fourth quarter.
In the fourth quarter, the economy shrank at its fastest pace since the recession began, the Bank of Spain said on Wednesday, dragged down by a steep drop in private consumption due in part to a September VAT hike and public wage cuts.”
Wage cuts would pose no problem if not for the inflationary policy of the ECB, which keeps prices high. It goes without saying that raising taxes in the face of an economic depression is an extremely bad idea. However, this is how 'austerity' generally works in euro-land. The burden of government is not reduced at all, instead it is increased even further. It is apparently fine for the European political class when the private sector shrinks, just as long as Leviathan's size remains unchanged. That this cannot possibly work out seems not to have occurred to anyone yet.
Unemployment in Spain is now at the highest level since records began in the early 1970s and exceeds even the unemployment rate of depression-wracked Greece:
Euro area unemployment rates compared: Spain holds a sad record – click for better resolution.
NPLs Continue to Rise
Non-performing loans at Spain's banks also continue to climb. In November, they were hitting yet another new record high at 11.38% of all outstanding loans. However, recent reports from individual banks suggest that the total will continue to swell when the December data are released. Even the 'better' banks are seeing their delinquent loans jump:
“Rising bad loans at Bankinter (BKT.MC) and Sabadell (SABE.MC) point to more pain for Spanish banks as they near the end of a deep clean of rotten property assets that hammered profits last year. Though Sabadell and Bankinter are among Spain's healthier lenders which did not need rescue funds from Europe, both have been hit by big writedowns on soured real estate assets in the wake of the country's property market crash.
The drive to mark down toxic assets pushed Spain to take around 40 billion euros ($53 billion) in aid from Europe in 2012 for banks in need of capital and unable to cope. Most banks in Spain will take the last hit from property-related write-downs in fourth-quarter 2012 results. But a deep recession is still hurting their loan books.
Mid-sized Bankinter warned on Thursday its bad loans could hit 5 percent of total loans this year, up from 4.28 percent at the end of 2012, given Spain's weak economy and rising unemployment, even though January had been a good month.
"If the employment data continues to be like what we saw (on Thursday), we cannot be optimistic," said Maria Dolores Dancausa, chief executive of Bankinter.
Barcelona-based Sabadell, meanwhile, said its bad loan ratio jumped to 9.33 percent of total loans at the end of December from 8.46 percent in September, largely because of the integration of its 2011 purchase of stricken savings bank CAM. "It's a level implying a fourth-quarter rise … far above our expectations," said Nuria Alvarez, analyst at Madrid broker Renta4. She added the bad loan ratio was an area to watch at Sabadell even though the lender has a state-backed scheme in place to protect it against future losses after it bought CAM.”
As a reminder, here is what the long term chart of Spain's NPLs looks like (data until November 2012):
Spain's NPLs and the unemployment rate as of November. Unemployment is already at a new high, NPLs are set to follow – click for better resolution.
Evidently, Spain is in a severe depression. It seems to us that the financial markets are currently way too sanguine about the risks. Ultimately all they are hanging their hat on is a promise by Mario Draghi that he will print more money. We doubt that will be enough.
Charts by: Eurostat, Reuters
You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.
Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke
One Response to “Spain – Unemployment and NPLs Continue to Soar”
Most read in the last 20 days:
- Gold Sector Update – What Stance is Appropriate?
The Technical Picture - a Comparison of Antecedents We wanted to post an update to our late December post on the gold sector for some time now (see “Gold – Ready to Spring Another Surprise?” for the details). Perhaps it was a good thing that some time has passed, as the current juncture seems particularly interesting. We received quite a few mails from friends and readers recently, expressing concern about the inability of gold stocks to lead, or even confirm strength in gold of...
- Incrementum Advisory Board Meeting, Q1 2017 and Some Additional Reflections
Looming Currency and Liquidity Problems The quarterly meeting of the Incrementum Advisory Board was held on January 11, approximately one month ago. A download link to a PDF document containing the full transcript including charts an be found at the end of this post. As always, a broad range of topics was discussed; although some time has passed since the meeting, all these issues remain relevant. Our comments below are taking developments that have taken place since then into...
- Trump and the Draining of the Swamp
Swamp Critters BALTIMORE – The Dow is back above the 20,000-point mark. Federal debt, as officially tallied, is up to nearly $20 trillion. The two go together, egging each other on. The Dow is up 20 times since 1980. So is the U.S. national debt. Debt feeds the stock market and the swamp. What’s not up so much is real output, as measured by GDP. It’s up only 6.4 times over the same period. Debt and asset prices have been rising three times as fast as GDP for 36 years! Best...
- Gold and Silver Divergence – Precious Metals Supply and Demand
Gold and Silver Divergence – Precious Metals Supply and Demand Last week, the prices of the metals went up, with the gold price rising every day and the silver price stalling out after rising 42 cents on Tuesday. The gold-silver ratio went up a bit this week, an unusual occurrence when prices are rising. Everyone knows that the price of silver is supposed to outperform — the way Pavlov’s Dogs know that food comes after the bell. Speculators usually make it...
- When Trumponomics Meets Abenomics
Thirty Year Retread What will President Trump and Japanese Prime Minister Shinzo Abe talk about when they meet later today? Will they gab about what fishing holes the big belly bass are biting at? Will they share insider secrets on what watering holes are serving up the stiffest drinks? [ed. note: when we edited this article for Acting Man, the meeting was already underway] Japan's prime minister Shinzo Abe, a dyed-in-the-wool Keynesian and militarist, meets America's...
- The Great Wailing
Regret and Suffering BALTIMORE – Victoribus spolia... So far, the most satisfying thing about the Trump win has been the howls and whines coming from the establishment. Each appointment – some good, some bad from our perspective – has brought forth such heavy lamentations. Oh no! Alaric the Visigoth is here! Hide the women and children! And don't forget the vestal virgins, if you can find any... You’d think Washington had been invaded by Goths, now...
- Receive a One Percent Gift When Buying or Selling a Home
How to Save Money When Buying or Make More When Selling a Home In your professional capacity and perhaps also in your private life, you may be closely involved with financial and commodity markets. Trading in stocks, bonds or futures is part of your daily routine. Occasionally you probably have to deal with real estate as well though – if you e.g. want to purchase an apartment or a house, or if own a home you wish to sell. The people who took this photograph probably want to...
- Unleashing Wall Street
To Unleash or Not to Unleash, That is the Question... LOVINGSTON, VIRGINIA – Corporate earnings have been going down for nearly three years. They are now about 10% below the level set in the late summer of 2014. Why should stocks be so expensive? Example of something that one should better not unleash. The probability that a win-lose proposition will develop upon meeting it seems high. It wins, because it gets to eat... Image credit: Urs Hagen Oh,...
- Silver Futures Market Assistance – Precious Metals Supply and Demand
Silver Is Pushed Up Again This week, the prices of the metals moved up on Monday. Then the gold price went sideways for the rest of the week, but the silver price jumped on Friday. Taking off for real or not? Photo credit: NASA Is this the rocket ship to $50? Will Trump’s stimulus plan push up the price of silver? Or just push silver speculators to push up the price, at their own expense, again? This will again be a brief Report this week, as we are busy...
- Boondoggles for the Swamp Critters
Monster or Mozart? BALTIMORE – Investors seem to be holding their breath, like a man hiding a cigarette from his wife. It’s just a feeling, and it’s not the first time we’ve had it... but it feels as though it wouldn’t take much to send them all running. Actually, they're not going anywhere yet... but there is a lot of overconfidence by those who were very worried when prices were a lot better - click to enlarge. Meanwhile... we’re coming to a deep...
- The Art and Pseudoscience of Monetary Policy
Definitely Maybe Everyone’s got a plan for sale these days. In fact, there are so many plans out there we cannot keep up with them all. Eat celery sticks and lose weight. Think and grow rich. Stocks for the long run. Naturally, plans like these run a dime a dozen. All social engineers who get to impose their harebrained schemes on the rest of the world through the coercive powers of the State, as well as all armchair planners regaling us with their allegedly...
- California, Nestle and Decentralization
Goodbye, Socialist Paradise Nestle USA has announced that it will move its headquarters from Glendale, California, to Rosslyn, Virginia, taking with it about 1200 jobs. The once Golden State has lost some 1690 businesses since 2008 and a net outflow of a million of mostly middle-class people from the state from 2004 to 2013 due to its onerous tax rates, the oppressive regulatory burden, and the genuine kookiness which pervades among its ruling elites.* There has been a...