January 1, 2009 / 12:13 AM / 9 years ago

Unemployment a social time bomb for Spain

8 Min Read

<p>Hays Recruitment Consultancy Section Manager Ignacio Ramos (L) interviews Vicente Balmaseda at the Hays offices in downtown Madrid December 5, 2008.Susana Vera</p>

MADRID (Reuters) - Tensions mounting between native job-seekers and immigrants competing for a declining pool of work in Spain will intensify in 2009 as generous benefits for those laid off reach the end of their fixed terms.

Unemployment at 12.8 percent in November, a 12-year high and by far the highest rate in the European Union, could reach 20 percent of the workforce in 2010 as a slump in construction spreads into the wider economy, economists say.

That is a level not seen since the 1990s and as Spain heads for its deepest recession in 50 years it may trigger social unrest like that of the 1980s, when high unemployment and low wages led to country-wide demonstrations and violent strikes.

Spain makes payouts of up to 70 percent of salaries for up to two years, depending on how long workers have been paying into the social security system.

With nearly 3 million unemployed, many of those laid off during 2008 will come to the end of dole payouts next year and will struggle to make ends meet in a depressed labor market with no sign of paid work.

"This coming year, a lot of people will stop receiving the dole," said Sandalio Gomez, professor of labor relations at business school IESE. "We could end up with social unrest as people take to the streets to demonstrate."

The make-up of Spain's workforce has changed drastically with the arrival of nearly 5 million immigrants boosting the population by 15 percent over the past decade.

Desperate Spaniards who have lost jobs in construction are taking up work they formerly shunned, from cleaning bars to fruit-picking, displacing immigrants who struggle to find alternative work.

Thousands of Andalusians applied to pick olives for this year's harvest from December to January, according to an Andalusian job agency, leaving the previous workforce of African immigrants without employment.

Despite offers from local authorities to pay their coach fares back to Africa, immigrants are sleeping rough or in homeless shelters in a situation described by one charity as a genuine social problem. Another flashpoint in the southern region could be February's strawberry harvest in Huelva, on the border with Portugal, where migrants traditionally find work.

Felix Veliz, a Madrid-based former construction sector worker from Ecuador who worked for Corman, which installed safety equipment in building sites, says many of his colleagues were forced to sleep rough when the company filed for administration in September.

The 49-year old who came to Spain nearly 10 years ago cannot claim dole or seek other work, as under Spanish law he is still tied to his former company while it files for administration.

"All we want is that the judge and the labor authorities reach a decision as soon as possible so we can claim dole or get a job with another company," he told Reuters at a commercial court in Madrid where he and fellow former employees have put in a plea to break their ties with the company.

"This is like a charity case now."

Married with two adult children, he said he used to earn up to 1,300 euros ($1,869) per month. His mortgage now costs 1,300 euros per month.

"They started docking our salaries in May," he said, his hands thrust into the pockets of a blue corduroy jacket in the cold December wind outside the wrought iron doors of the court.

"In July the company stopped paying altogether. That's nearly six months, up to now. We are living off loans from friends and family."

Discrimination

Ripples from a crumbling construction sector are spreading out into the wider economy, bringing down peripheral businesses like air-conditioning installers and tile manufacturers.

The number of Spanish companies entering administration in the third quarter nearly quadrupled from the year-ago period, according to the National Statistics Institute.

<p>Felix Veliz stands at the office of General Workers Union (UGT) worker Jose Luis Chifon in Madrid December 17, 2008.Susana Vera</p>

"It's the domino effect from the construction sector," said Jose Luis Corell Badia, a Valencia-based lawyer and head of corporate restructuring at Ernst & Young Abogados. "I don't see light at the end of the tunnel. It's job destruction."

Cristina Ballesteros, a 29-year old former secretary for the vice-president of a multinational cement company, said competition for work is such that potential employers ask her if she plans to have children, even though it is illegal to do so.

She lives with her boyfriend but has taken to saying she is single to improve her chances.

"I share a rented flat, but if it was not for that I'd be back living with my mother," she said.

"I studied to be a secretary: it's not a degree, it's a two-year diploma, but now I find there are many employers who want you to have a degree to do a secretary's job. People accept it, because they have no choice. They are asking for more and more, when it's really not necessary."

Outside the Madrid commercial court, others are fighting to receive payments to which they are entitled. Rafael Pliego, 54, was recently fired from his job as a security guard and has already signed up for dole but not yet received his cheque.

"I have an illness and they told me I couldn't continue working and they fired me. It happened on October 30. I had only been working with them for five months," he said.

Slideshow (7 Images)

"I carry on looking for work, of course. I had the bad luck to get sick, and this happened."

Ballooning Deficit

Spain's government ran the second highest surplus in the euro zone in 2007, equal to 2.2 percent of GDP, but the public accounts are sinking into the red as tax income falls and the number of people claiming unemployment benefit rises.

The central government budget deficit leapt to 14 billion euros in the first 11 months of 2008 -- equivalent to 1.28 percent of GDP. The central government deficit is part of Spain's wider public sector budget, which includes the social security system, regional and municipal accounts.

Social security payouts alone in 2009 will double to 3.0 percent of gross domestic product, according to FUNCAS savings bank consultancy.

"It's grown this year at an incredible rate," said FUNCAS analyst Angel Laborda.

FUNCAS forecasts for the budget deficit in 2009 and 2010 are already obsolete, he said, and will probably come in at around 6 percent of GDP in 2009 and 7.5 percent in 2010.

That would shatter a European Union limit of 3 percent of

Gdp.

Prime Minister Jose Luis Rodriguez Zapatero said on Saturday the country would start to see the first shoots of economic recovery within the coming year.

"The first signs of economic recovery, in the government's opinion, will be in the second part, toward the end of 2009. We will be at a point when confidence starts to recover," he said in an interview broadcast on his party's Web site.

But Vicente Balmaseda, 36, who lost his job as a conference stand designer six months ago and has been studying to improve his chances as he looks for fresh work, is pessimistic.

"I've sent around 200 resumes, every day I send them. At best I've had three or four interviews. I've only had one direct interview with a company, the rest were with agencies.

"It's getting me down. The job market in Spain is bad across all sectors. From what they say on the TV, it's only going to get worse next year."

Additional reporting by Ben Harding and Judy MacInnes; Editing by Sara Ledwith

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