An extraordinary crisis, an ordinary recovery

In the late 1970s all countries in Western Europe were struck by a recession that destroyed many jobs. While most nations hit rock bottom between 1983 and 1984, the worst year for Spain was 1985 because here the recession was compounded by a political crisis. Still, 1986 and 1987 saw growth and new jobs in Spain and everywhere else. Following a two-year recession, in 1994 employment figures dropped to an all-time low, whereas in 1995 and 1996 the economy grew, bringing new jobs to Spain and elsewhere. Then, after a six-year recession, unemployment rose to new record figures in 2013, while in 2014 and 2015 the economy improved and so did job creation.

To sum up, even though all incumbent governments like to take credit for the recovery of the economy, experience has shown that it coincides with a recovery in the neighbouring countries. In particular, the current economic recovery in Spain is not down to the ruling Partido Popular (PP), but it is happening now because now is when it was due to happen.

Still, at the event where they presented a campaign video depicting Spain as a patient saved by an intensive care medical team, Spanish vice president Soraya Sáenz de Santamaría claimed that Spain’s recovery is exceptional because it is showing the highest job creation and growth rates of “the eurozone”. It is an exaggeration for the PP to take credit for the current recovery, although its intensity might be down to them. In order to analyse the matter, first we must find out if the present recovery is exceptionally robust. It is not.

It is not exceptionally robust because it is less so than the two previous recoveries (which, incidentally, were managed by the PSOE, Spain’s socialist party). Indeed, in 1986-87 Spain’s GDP rose by 9.3 per cent, by 6.6 per cent in 1995-96, and the growth for the 2014-15 period will amount to 4.5 per cent. In terms of job creation in the same three biannual periods mentioned earlier, the figures are 6.8, 5.4 and 3.8 per cent, respectively (the latter is the result of comparing the first three quarters of 2015 with the same period in 2013).

Spain’s currently recovery is relatively outstanding when compared to the rest of the countries in Western Europe. But it is far from being the most robust, given that Spain’s GDP growth is smaller than in Ireland, the UK and Sweden.

What can we say regarding Sáenz de Santamaría’s claim about having the highest job creation rate in the eurozone? Well, that it is only half true. For instance, more jobs are being created in the UK. Of course, the UK is not in the eurozone, which means that the Spanish vice president technically isn’t lying. Besides, she could argue that the UK is larger than Spain, so it is no wonder that it is creating more jobs. What’s more, isn’t it remarkable that Spain is creating more jobs than Germany, an even larger country which is actually in the eurozone? Well, it isn’t. While it is true that Germany’s population is twice as large, its unemployment rate in the worst year of the recession was only 5.2 per cent. Additionally, if we look at job creation versus size of the country, then Spain’s pace is slower than Ireland’s.

All in all, it is not exceptional for Spain to be going through a recovery period, nor is it an exceptionally robust one.

What is exceptional, though, is the intensity of Spain’s recessions and their increasing acuteness. In 1985 unemployment rose to 21.3 per cent, three times the Western European average (7.3); in 1994, it hit 24.1 per cent, while Europe’s average was 9 per cent. Finally, in 2013 Spain’s unemployment rate was 26.1 per cent; again, three times as high as Europe’s average (8.2).

The PP’s video is right in its depiction of 2013 Spain as a critically ill patient, but gets it wrong when it shows the country as if it were on the mend in 2015. Spain’s malady is chronic. As in 1985 and 1994, devaluation is the remedy employed to get over the recession. Back then, they achieved this by reducing the parity of the Spanish peseta, whereas now it has been done by forcing salary cuts. But a devaluation is merely an economic stimulus, not a cure. The only way to overcome this prostration is to become a more productive country, which will not be achieved through pay cuts.

To conclude, there is no evidence to suggest that we are on our way to a solid recovery and our leaders’ euphoria is, perhaps, the worst of it all because it shows that --once again-- they have failed to understand that the therapy which their country needs is a different one.

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