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More Jobs in Spain, but Only Temporary Ones

June 4, 2013 by Leave a Comment

MADRID — The Spanish government said Tuesday that an unexpected drop in unemployment in May was one of the best pieces of economic news since the start of the crisis, but the data showed that temporary hires accounted for much of it.

The number of people registered as unemployed declined by almost 2 percent, or 98,265 people, compared with the previous month, according to government statistics. Stripping out seasonal hires in areas like tourism and agriculture, the number of unemployed only dropped by 265 people.

Roughly 6.2 million people are out of work in Spain, and unemployment stands at about 27 percent.

The data suggest that Spain is increasingly turning into a two-tier labor market, as some employers hire people back on cheaper short-term contracts while the work force on permanent contracts, already at its lowest level since 1997, continues to fall.

Still, José Manuel Soria, the industry minister, welcomed the data as “the best we have seen since the crisis started.” Prime Minister Mariano Rajoy said that the “good news” on the unemployment front vindicated the government’s economic policy as “the adequate one,” even as austerity measures have led to mass street protests and have seen Mr. Rajoy’s popularity reach a record low.

Spain has been on the front line of the euro debt crisis for two years, and the deteriorating economy has pushed unemployment to more than double the European Union average. Last week, the Organization for Economic Cooperation and Development forecast that Spain’s jobless rate would continue to rise and surpass 28 percent in 2014. Most economists also expect unemployment to peak around that level amid weakening domestic consumption caused by a prolonged recession and a credit squeeze that continues to hurt businesses.

Still, analysts at Barclays Capital said the latest employment data, coupled with recent figures showing an improvement in manufacturing, suggested that Spain would come out of recession early next year. “We think that the latest labor market statistics support our view that the worst phase for the Spanish economy may now be over,” Barclays wrote to investors on Tuesday.

Antonio Argandoña, an economics professor at the IESE business school, called the May unemployment data “a small satisfaction” but warned that it would be “catastrophic” if such a seasonal improvement led the authorities to shelve further measures to encourage companies to hire more workers.

Over all, only about 7 out of 100 people who came off the rolls of the unemployed last month managed to find permanent jobs. But Engracia Hidalgo, the secretary of state for employment, said the government was not particularly preoccupied about what kinds of jobs were being offered. “What is important now is that people find a job and start to work,” she said.

Article source: http://www.nytimes.com/2013/06/05/business/global/more-jobs-in-spain-but-only-temporary-ones.html?partner=rss&emc=rss

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E.U. Is Pressed to Reconsider Cuts as Economic Cure

April 27, 2013 by Leave a Comment

After years of insisting that the primary cure for Europe’s malaise is to slash spending, the champions of austerity, most notably Chancellor Angela Merkel of Germany, find themselves under intensified pressure to back off unpopular remedies and find some way to restore faltering growth to the world’s largest economic bloc.

On Friday, Prime Minister Mariano Rajoy of Spain, who once promoted aggressive budget cuts, became the latest leader to reject European Union targets for reducing deficits.

That is one of several developments — a recent court ruling against job cuts in Portugal; a new, austerity-averse prime-minister-in-waiting in Italy; and mounting doubts among ordinary Europeans and even the International Monetary Fund — that have forced senior officials in Brussels to acknowledge that a move away from what critics see as a fixation on debt and deficits toward more growth-friendly policies is necessary.

“There has been a clear shift in thinking,” said Guntram Wolff, a German economist who has worked at the European Commission, the union’s policy-making arm, and is now acting director of Bruegel, a Brussels research group.

The flurry of activity comes after an influential academic paper embraced by austerity advocates as evidence that even recessionary economies should cut spending to avoid high debt levels, written by the Harvard scholars Carmen M. Reinhart and Kenneth S. Rogoff, has come under attack for errors that opponents of austerity say helped lead European policy makers astray.

Europe is not about to throw open the spending spigots in the 27 nations of the European Union, even as the bloc teeters on the edge of a new regionwide recession. But officials are clearly shifting toward what Leonardo Domenici, an Italian member of the European Parliament, described as “austerity with a human face.”

Even Ms. Merkel has tried of late to soften her image as the unbending deficit scold of Europe. Asked at a forum in Berlin this week whether the “screw of austerity” had been turned too tight, she complained that what used to be “called saving or consolidation or balanced budgets” is “now called austerity,” adding that this “really sounds like something completely evil.”

In Brussels, the president of the European Commission, José Manuel Barroso, said Europe had been right to tighten its belts, but now needed to soften its approach to win back an angry public. “While this policy is fundamentally right, I think it has reached its limits in many respects,” he said. “It has to have the minimum of political and social support.”

Hints of a new approach in Europe are likely to be greeted as good news by the Obama administration, which has urged healthy European economies to stimulate growth with increased spending and more relaxed monetary policy. The American economy, where government spending has not been reduced as drastically, looks relatively robust in comparison with Europe.

Olli Rehn, a tough-minded Finn responsible for economic and monetary affairs at the European Commission, has taken pains in recent days to stress that, with financial markets mostly becalmed, rapid “fiscal consolidation” — essentially spending cuts and tax hikes — has run its course and will slow to a less painful pace.

Such consolidation, he told a hostile audience in the European Parliament on Thursday, will this year be just half what it was last year, and substantially less severe than cuts planned in the United States. “It is important that we strengthen the social dimension,” he added, describing unemployment in hard-hit countries like Spain, which this week reported a jobless rate of 27.2 percent, as “unacceptably high.”

The change, Mr. Wolff of Bruegel said, began months before the recent academic flap over the Reinhart and Rogoff research but had often gone unnoticed, in part because Germany, the dominant voice in the union’s economic policy, “didn’t want to make a big fuss” and risk pushback from German politicians opposed to cutting Europe’s heavily indebted economic laggards any slack.

But while Ms. Merkel, who faces an election in September, may be backing away from the word “austerity,” she is not aligning herself with France’s Socialist president, François Hollande, and others in demanding that the policy behind the word be radically revised.

European Union officials insist that their economic policy has never been as dogmatic or narrowly focused on spending cuts as critics claim, and say they have long since moved beyond just austerity. But unable to speak plainly in any of the union’s 23 official languages, they have had trouble explaining their efforts in a manner that ordinary people can understand.

Article source: http://www.nytimes.com/2013/04/27/world/europe/eu-is-pressed-to-reconsider-cuts-as-economic-cure.html?partner=rss&emc=rss

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Workers in Southern Europe Synchronize Anti-Austerity Strikes

November 14, 2012 by Leave a Comment

Spain’s heavy industry and large parts of the transportation network were disrupted early on Wednesday by the second general strike since the Popular Party of Prime Minister Mariano Rajoy came to power last December.

The Spanish strike was called by unions after Mr. Rajoy presented a tough austerity budget for next year but it also comes after the country’s jobless rate recently reached a record 25 percent. Portugal faces a similar situation of soaring unemployment and budget cuts to comply with the terms of a $100 billion bailout agreement reached last year with international creditors.

Early on Wednesday, Spanish police reported that 32 people had been arrested and 15 injured – including five policemen — during violence on picket lines across the country but the government said the strike had so far not led to major disturbances. Many shops, banks and retailers were open for business.

While about 700 flights in and out of Spain were canceled Wednesday, Madrid and other airports were still functioning. The strike coincided with growing uncertainty about the future of Iberia, the national airline, after management announced this month that the airline needed to lay off a quarter of its workers to survive.

Ignacio Fernández Toxo, the head of one of Spain’s two main unions, Comisiones Obreras, said that the coordinated strike action across the Iberian Peninsula, as well as work stoppages in other parts of Europe, amounted to “a historic moment in the European Union movement.”

However, support for trade unions has dwindled in recent years because of their failure to prevent the surge in unemployment and controversy surrounding the unions’ reliance on government subsidies rather than contributions from members. In Spain, only about 16 percent of workers are unionized.

In fact, the strike could be overshadowed by protests in Madrid and other cities scheduled for late afternoon.

“I can afford to protest but not to lose a day of pay,” said Carlos Sánchez, a mechanic at Disancar, a small Madrid garage. “Striking at this stage in the crisis brings absolutely nothing to the workers.”

Still, the strike severely disrupted production across the Spanish automotive sector, with workers staying away from factories owned by Nissan, Volkswagen and other carmakers.

In Italy, civil servants went on strike and national transportation workers – although not airlines — called for a four-hour halt on Wednesday afternoon. Students demonstrated throughout the country, with rallies in Turin and Rome.

In Greece, the scene of the most violent social unrest in Europe since the start of the debt crisis, unions called a three-hour work stoppage starting at noon.

Union workers elsewhere also staged a number of protests and stoppages as a show of solidarity with their southern European counterparts.

A walkout by Belgian rail workers severely disrupted services on the country’s Thalys high-speed rail line and halted all its connections to Germany, the rail company said Wednesday.

More than 130 demonstrations were planned across France, with two of the country’s biggest unions — the Confédération Générale du Travail, or CGT, and the Confédération Française Democratique du Travail, or CFDT — organizing a joint march through the streets of Paris, the first such protests since President François Hollande took office in May.

In a joint statement, five leading French unions expressed their “strong opposition to these austerity measures that are plunging Europe into economic stagnation and recession” and “threaten the European social model.”

Spanish unions disagreed with the government and employers over the impact of the strike Wednesday morning. While Mr. Toxo and other union leaders called the strike a success, Juan Rosell, the chairman of the main employers’ organization said that the walkouts appeared to be “not very important” and most likely less disruptive of the last general strike in March, based on electricity data and other early indicators. Red Eléctrica, operator of the national electricity grid, said that consumption was down 18.6 percent at 8 a.m. compared to a normal working day.

Nonetheless, Mr. Rosell called the decision to strike “a torpedo against recovery.”

Indeed, it comes as Mr. Rajoy is struggling to convince investors that Madrid will not require further European rescue funding and will meet budget deficit targets agreed with its European counterparts, in spite of a deepening recession.

In Valencia, a group of strikers tried to block access to the main office of Bankia, a giant lender that the government was forced to nationalize last May because of bad loans, triggering a crisis that forced Madrid to request more than $100 billion in European bailout funds a month later. More recently, banks provoked a public outcry over the evictions of families unable to meet mortgage payments.

Elisabetta Povoledo contributed reporting from Rome, Nicola Clark from Paris, and Niki Kitsantonis from Athens.

Article source: http://www.nytimes.com/2012/11/15/world/europe/workers-in-southern-europe-synchronize-anti-austerity-strikes.html?partner=rss&emc=rss

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Italy and Spain Keep E.C.B.’s Offer on the Shelf

October 29, 2012 by Leave a Comment

Instead, both the Spanish prime minister, Mariano Rajoy, and his Italian counterpart, Mario Monti, insisted that they would continue to push for rapid adoption of a European fiscal and banking union. “With regard to the European agenda, Spain and Italy are more united than ever,” Mr. Rajoy said at a joint press conference with Mr. Monti.

Mr. Rajoy has been under pressure to tap a bond-buying program announced by Mario Draghi, the president of the E.C.B., in early September. But he has refused to leap at the opportunity, and on Monday he said Madrid would ask for such funding only when he felt it was “convenient” to do so. Mr. Monti also dismissed the idea that Italy would need such help to meet its immediate refinancing obligations.

Neither leader is eager to expose his government’s finances to the greater European scrutiny that requesting the aid would entail.

The Madrid meeting came shortly after Mr. Draghi endorsed a proposal initially made by Wolfgang Schäuble, the German finance minister, to establish a European monetary and economic affairs commissioner. That person would have the power to intervene in national budgets if euro zone governments broke deficit rules. Creating such a post would probably would require the approval of all 27 countries in the European Union.

“If we want to restore confidence in the euro zone, countries will have to transfer part of their sovereignty to the European level,” Mr. Draghi said last week during an interview with the German magazine Der Spiegel.

Mr. Rajoy and Mr. Monti discussed the supercommissioner proposal on Monday, but neither offered support for the idea, warning that it could further confuse investors about policy making in the euro zone.

“There is a limit to the signals that can be given to the markets in terms of fiscal virtue,” said Mr. Monti. “The markets could see this as meaning that the existing instruments don’t work.”

The Rajoy-Monti show of unity underlines the extent to which Madrid and Rome face the same challenges in persuading investors to buy their debt at a sustainable borrowing cost.

Mr. Monti argued that the difference between the interest rates of German and Italian government bonds, albeit less than before the E.C.B.’s bond-buying offer, remained “higher than what is justified” by economic fundamentals.

Mr. Rajoy went a step further. “We cannot live in a European Union where some countries get financing for free and others for a lot more,” he said.

But for now, Mr. Rajoy also has his own struggles, including a Spanish jobless rate of 25 percent and a separatist drive in Catalonia, Spain’s most powerful economic region. Asked about the political tensions with Catalonia, Mr. Rajoy insisted on Monday that “we will overcome this situation through dialogue and by applying the law.”

But Mr. Rajoy also accused Artur Mas, the Catalan leader, of having left him no room to negotiate after Mr. Mas visited him in September to demand that Catalonia receive a better tax treatment from Madrid. “You cannot say take it or leave it,” Mr. Rajoy said.

Article source: http://www.nytimes.com/2012/10/30/business/global/italy-and-spain-keeping-ecb-offer-on-the-shelf.html?partner=rss&emc=rss

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Markets in Europe Little Moved by Downgrades

January 16, 2012 by Leave a Comment

President Nicolas Sarkozy of France, in his first public comments since Standard Poor’s cut the country’s rating Friday by one notch from the top AAA grade, said that “in the final analysis, this doesn’t change anything.”

Speaking in Madrid at a joint news conference with the Spanish prime minister, Mariano Rajoy, Mr. Sarkozy said France and the other European countries that were downgraded “must cut our deficits, cut spending and improve the competitiveness of our economies to return to growth.”

Market activity was subdued Monday, with Wall Street closed for the Martin Luther King’s Birthday holiday, but analysts were looking ahead to a flurry of activity ahead of the European Union’s next summit meeting, which is to be held Jan. 30 in Brussels.

Much of the attention is focused on Greece, where talks on the amount by which private-sector lenders would write down the value of their holdings of Greek bonds broke down last Friday, but were to resume this week.

“The progress or otherwise of these negotiations will probably dictate how the market trades over the next few weeks,” said Gary Jenkins, the founder of the fixed-income analysis and consulting firm Swordfish Research, according to The Associated Press.

Mr. Rajoy, who broke a pre-election promise by raising taxes, told journalists that he did not think additional tax increases would be necessary. He also said Spain should continue to hold a seat on the board of the European Central Bank.

Herman Van Rompuy, the president of the European Council, met Monday in Rome with Prime Minister Mario Monti of Italy. “Market players or rating agencies sometimes consider our response as incomplete or insufficient,” Bloomberg News quoted Mr. Van Rompuy as saying at a news conference after the meeting. “Yet real progress has been made in reshaping the euro area in order to build on its fundamentals, which are on average sound.”

The decision by S.P. to cut France’s credit rating had been widely expected, especially after the agency accidentally released a draft downgrade announcement in November, and it apparently had no immediate effect on the market for French debt.

In its first test of investors’ appetite since the downgrade, the French Treasury on Monday sold €8.6 billion, or $10.9 billion, of short-term debt securities at yields slightly lower than in the previous auction. The yields on the country’s 10-year bonds fell 0.04 percentage point by late Monday, to 3.014 percent.

Moody’s Investors Service, a rival to S.P., on Monday said it was maintaining its own top rating of France, at Aaa, for the time being, with the results of a review that is currently under way to be announced before April.

In trading Monday, the Euro Stoxx 50 index, a barometer of euro zone blue chips, closed up 1 percent, and the FTSE 100 index in London rose 0.4 percent. Indexes rose in France and Italy and were little changed in Spain.

In addition to France, S.P. also cut the ratings of Austria, Italy and six other European countries last week. The agency cited a deteriorating economic situation and disappointment with leaders’ efforts to address the euro crisis.

On Monday, yields on Italian 10-year bonds edged down one basis point, to 6.581 percent, while Spanish 10-years were yielding 5.117 percent, down four basis points. A basis point is one-hundredth of a percentage point.

Reuters cited unidentified traders as saying the European Central Bank had intervened in the secondary bond market again, buying Italian and Spanish securities to relieve some pressure on yields.

Yields on German 10-year bonds, the European benchmark, were unchanged, at 1.764 percent.

The dollar was mixed against other major currencies. The euro slipped to $1.2673 by late Monday in Europe from $1.2680 late Friday in New York, while the pound rose to $1.5325 from $1.5317. The dollar fell to ¥76.75 from ¥76.97, but rose to 0.9538 Swiss francs from 0.9524 francs.

Asian shares fell. The Tokyo benchmark Nikkei 225 stock average slid 1.4 percent. The Sydney benchmark index fell 1.2 percent. In Hong Kong, the Hang Seng fell 1 percent and in Shanghai the composite index declined 1.7 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=39e1817c0f3f1e0c39a1fa1528fae1c1

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Banco Santander Chief Executive Is Given Pardon

November 26, 2011 by Leave a Comment

LISBON — Spain’s departing Socialist government granted a pardon on Friday to Alfredo Sáenz, chief executive of Banco Santander, commuting a three-month prison sentence and a temporary ban from working as a banker. Instead, Mr. Sáenz must pay a fine.

The government’s unexpected decision removes a source of the uncertainty surrounding the leadership of Santander, the largest bank in the euro zone by market valuation.

In March, Spain’s Supreme Court upheld an earlier court ruling against Mr. Sáenz, who was convicted for making false accusations in 1994 in a case involving Banesto, a troubled bank that was eventually taken over by Santander.

The ruling had included a three-month ban for Mr. Sáenz from working in the banking industry, but he had stayed in his job pending an appeal and his request for a pardon from the government.

The government gave no explanation for the pardon, which came just weeks before José Luis Rodríguez Zapatero, the prime minister, was scheduled to relinquish power to a center-right government led by Mariano Rajoy. Mr. Rajoy’s Popular Party swept to a landslide victory in the Nov. 20 election against Mr. Zapatero and his Socialists.

A spokesman for Santander said that the bank was “satisfied” with the decision, without commenting on what the implications would be for the court appeal.

Spain’s justice ministry described the decision as a partial pardon, since Mr. Sáenz would still have to pay the “maximum fine” corresponding to his earlier conviction. The exact amount, however, was not specified.

A similar pardon was also granted Friday by the government to two other defendants in the 17-year-old case — Banesto executives found guilty alongside Mr. Sáenz.

José Blanco, one of the most senior ministers in the outgoing Zapatero government, would not say whether the decision to pardon the bankers had been done with the consent of the incoming Popular Party.

For the last decade, Mr. Sáenz, 68, has been second-in-command at Santander to Emilio Botín, who has been Spain’s most influential banker and the bank’s chairman for 25 years.

While Santander has suffered along with other Spanish banks from its exposure to a collapsed real estate market, its formidable assets outside of Spain, particularly in booming Brazil, have allowed the bank to weather the euro debt crisis better than many of its counterparts. Since the onset of the European financial crisis, Santander has continued to try and take advantage of falling valuations in order to buy assets overseas and offset a weakening domestic market. Recent transactions have notably expanded Santander’s presence in markets like Mexico and Poland.

Separately, Mr. Botín and 11 of his relatives have been the focus of a tax evasion investigation, started in June by a Spanish court, relating to an undeclared Swiss bank account. The Botín family account was part of the data handed over to the Spanish tax authorities by their French counterparts, after it was leaked by a former information technology expert who had worked for the Swiss private banking subsidiary of HSBC.

Article source: http://www.nytimes.com/2011/11/27/business/global/banco-santander-chief-executive-is-given-pardon.html?partner=rss&emc=rss

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