Some Reasons for Spain’s Economic Difficulties

I learned today how the Spanish people are being bled dry by their inept government. It is staggering to hear that companies are being screwed by having to pay a massive 45% social security on every salary they pay out to their staff. The effect on the country’s employment rate is incalculable.

Spanish Unemployment

Spanish Unemployment

It has put most companies in an impossible position, in that they cannot afford to hire new workers because of this huge amount from each salary that goes to the government. Likewise, people are in desperate straits trying to exist on the small pay they receive because it costs the companies too much to give them a living wage.

As you can imagine, companies are loath to take on new workers due to this huge tax burden, and this I believe is one of the reasons for the huge unemployment levels in  the country.

House of Horrors

House of Horrors

The governments point of view I suppose is they consider this move necessary to cover the huge cost of unemployment benefit, which the figures show has gone through the roof in recent years. It seems the government fails to see that if they made it easier for companies to hire more workers, the unemployment figures would tumble and therefore cost them less in benefits. It’s a simple question of balance, and the government is way off line.

Even though unemployment benefit in Spain is meagre by anyone’s standards, and barely enough for an average family to live on, people are only entitled to it for a maximum of two years, after which time they get nothing.

At Wits End

At Wits End

Another atrocious rule from the government is that governing pensions. From what I have been told, you must work and pay into the system for a minimum of 25 years to qualify for a pension. In effect, this means you could be working for 24 years and when you retire you would get nothing. Most other countries pay out a percentage for the years you have paid into the scheme, i.e. if you pay in for 50% of your working life you get a 50% pension. But not Spain, its 25 years or nothing. This is scandalous in anyone’s language and has a dramatic effect on everyone.

I will freely admit to not being an economist, but one of the glaring questions over this governments policies is: Where does all this money go?

The Spanish people certainly don’t see any of it in improvements to the infrastructure or their living conditions. As a single example, many roads in Spain are in atrocious condition but not a single penny is spent on improving them. Wages have been stagnant for several years but prices for everything continue to rise at an alarming rate. Spain still has a huge debt that will take many years to overcome, and the entire economy is constantly on the verge of collapse.

P.M. Rajoy - Also Accused Of Corruption

P.M. Rajoy – Also Accused Of Corruption

Only one thing that is certain, and that is the rich will continue to get richer, and the rest will continue to suffer for some time. There is little doubt that all the corrupt politicians, both at government and local level, will continue to skim off their percentage until strong action by the law takes place and these people are sent away for a long time.

As a bystander, it seems to me this country has one of the most inefficient governments in Europe, and things will not get better in the foreseeable future. As one Spanish politician is quoted as saying recently, “The Spanish people work more hours per week than any other nation in Europe, but they also have the lowest productivity!” There has to be a message there. I wonder if anyone will take notice?

Roy.

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