"NO WHITE CHRISTMAS"

Everybody knows the Christmas Carol “White Christmas” which reaches this year the age of 70. The Spanish translation of “White Christmas” is “Blanca Navidad” and currently the source of a very popular word game difficult to translate. Instead of “Blanca Navidad” everybody speaks of “Navidad sin Blanca”, literally something like “no white Christmas” that really means “Christmas without money”. It’s easy to guess the origin o such a joke: 26% of unemployment (36% with no unemployment benefits), 3 million of public employees without Christmas allowance and frozen salaries for years and over 60% of workers whose gross salary is bellow 1.000 €, without forgetting new taxes on health, education, transport or justice services and the increase of TVA and income tax.

The lack of money will have a clear impact on consumption. This Christmas the average expenditure per person (514 €) will fall by 4% regarding 2011 and 38% comparing 2008 data. It’s expected that 191 € will go to food expenditure, 163 € to gifts (mostly for children), 82 € to the very traditional Christmas Lottery and 78 € to leisure activities.

The crisis will reduce the Christmas budget but also consumption patterns. On January the 6^th the most of the children will receive (cheaper) Christmas gifts from the Three Wise Men (they are much more popular than Santa Claus in Spain) but no adults.  There is no place to whims or surprises; this is the year of useful gifts such as clothes, shoes or household appliances that should be replaced. And something unthinkable until now: second hand gifts are welcome.  One of the “collateral damages” of the sharp decline of consumption is the closing-down of one out of four shops.

Happy New Year!

"Navidad sin Blanca" Christmas Carol

A WEEK TO FORGET

This week different reports have seen the light of the day showing that Spain has broken historical records (all negatives).  Last entry we addressed the issue of the Living Conditions Survey 2012. Today we’ll focus our attention on the Labour Force Survey (EPA, in Spanish) corresponding to third quarterly of the current year. We’ll stress the main findings and then we’ll try to reflect on them.

First of all, the EPA is one of the most rigorous surveys in Spain and the only accredited by the EU in relation to unemployment.

For the first time in history unemployment rose above 25% (25’02%). That means 5.778.100 unemployed people, 3’2 million more than five years ago. 96.000 employments were lost in the last quarterly, half of them in the public sector (direct outcome of budgetary cuts). Men and people between 25 – 35 years old are the most affected by job destruction.  The number of fixed-term and part-time contracts grows up meanwhile permanent contracts decrease. There are 1.737.900 homes wich all of households members are unemployed. Unemployment is expected to rise next year.

And now, some comments on unemployment figures. Since 2010 both socialist and people’s parties agrees that labour market was the most important Spanish problem. High unemployment rates or temporary contracts were supposed to be the obvious symptoms of an inefficient labour market.  So in both cases they decided to reform labour market laws making easier and cheaper redundancies, reducing salaries, undermining collective bargaining, increasing the power of employers and weakening union’s competences, setting new precarious contracts…  The outcome of all theses measures is in the last EPA: more unemployment and more precarious jobs and an uncover result: the ongoing transfer from labour incomes to capital incomes.

By the way! A new record to take into account: more than 1.200 demonstrations have taken place in Madrid in the first nine months of 2012.

Unemployed people - unemployment rate - homes wich all of households members are unemployed

LIVING CONDITIONS SURVEY 2012

This week has been published the Living Conditions Survey 2012 by the National Statistics Institute (INE). This report is particularly significant because its statistical data are accredited and compatible for all EU member States. Let us see the main findings of the document:

·         The yearly average income of households reached 24.609 €, that is – 1’9% with respect to 2010 and around the amount of 2006.

·         21’1 % of people is at risk of poverty and for unemployed people the risk ups to 35’8%.

·         There is a broad regional gap. The risk of poverty is significantly lower in Navarra (8’8%), Asturias (9’9%) or the Basque Country (10’8%) than in Andalusia (31’7%), Extremadura (31’9%) or Canary Islands (33’8%).

·         12’7% of households says that it’s very difficult to make ends meet (+ 2’9% than 2011).

·         44’5% (+ 5’6%) of households can’t afford to pay for at least one week annual holiday away from home.

·         40% (+ 4’1%) of households cannot afford unforeseen expenses.

·         7’4% (+ 1’2%) of households delays payments related to the main residence (rent, mortgage, gas or electricity receipts…)

Also this week the Government has announced that unemployment will continue growing in 2013, the economy will decrease around 1’5% and we’ll face new budgetary cuts.



ECONOMIC DIFFICULTIES OF HOUSEHOLDS 2012



HISTORICAL RED CROSS DAY IN SPAIN

Four different news items related with our last entry were published this week.  First of all, we will refer to the so called Red Cross “Día de la Banderita” (Little Flag Day). Every year, thousand of Red Cross volunteers take the streets carrying piggy banks asking for money.  People give some coins (or bank notes) and they receive in return Red Cross stickers (“”banderitas”). The amount collected goes to specific vulnerable groups abroad: starving population in African countries, poor people affected by the earthquake in Haiti or the tsunami in the Indian Ocean and so on. But this year the Red Cross Day was different. For the first time in history the money shall be used to fight poverty in Spain. This shows the current importance of poverty affecting Spanish people.  I suggest you to click the following link:

http://elpais.com/sociedad/2012/10/08/videos/1349719163_408579.html

It’s a commercial (in Spanish) encouraging people to donate money to the Red Cross. The most striking image is the moment when volunteers aid to a father sharing a one-egg omelette between his two children.

Also regarding poverty, UNICEF has warned about the impact of the crisis on child poverty. 2.267.000 Spanish children (25%) are living bellow the poverty threshold (+ 4% than 2011). More than a half of them (14’4 %) suffer from severe poverty.

It’s hardly surprising this situation taking into account that Spanish households loss 18’4% of their wealth in 2011. According to the Global Wealth Report by Credit Suisse is the largest drop of the Eurozone.

And finally we deal with the question of inequality. Eurostat shows an increasing gap between poor and rich people after the onset of the crisis. In fact never inequality had never before been higher. 34 was the Spanish Gini Coefficient in 2011, in other words, the worst EU score out of Latvia. But results can be worse. According to the so called “Ratio 80/20” (relation between the richest 20% and the poorest 20%), Spain is the winner in inequality (7’5) ahead of Latvia (7’3) and far away from Germany (4’6) or Norway (3’3).

Nevertheless, I’m deeply convinced that the most important finding is that all those reports agree that the source of poverty and inequality is unemployment, lower salaries and wages and social cuts. Austerity policies, in other words. Meanwhile, Van Rompuy today announced that Spain is in the right track. Astonishing!

CARITAS REPORT ON POVERTY IN SPAIN

Caritas has just published the “7^th Report of the Observatory on Social Reality” assessing the impact in Spain of the current crisis. The most relevant findings of the report are as follows:

·         We witnessed a substantial increase of poverty, mostly due to unemployment and cuts in social protection. Nevertheless a job is not a guarantee of social inclusion:  2’5 million people (15% of working population) are poor workers.

·         Nowadays 25% of population is at risk of poverty, that means that Spain shows emerging countries ratios.

·         During the years of economic growth, net social spending increased but not the social spending/GDP ratio.

·         In 2011, Caritas attended three times more people (over 1’1 million) than in the onset of the crisis. 40% of people attended were in chronic poverty.

·         The most vulnerable groups are young couples with children and immigrants. But the most remarkable fact is the increasing number of former middle class people demanding aid.

·         320 € is the average income of people attended by Caritas, that is 50% bellow of poverty threshold.

Poverty is sharply increasing as well as inequity. There is a growing mixed feeling of indignation and hopeless

EVERUBODY LIES: SPAIN WON’T MEET ITS DEFICIT TARGET

Last July, Eurozone finance ministers agreed to grant the Spanish Government one more year to reach a deficit target of 3%. Thus, the deficit in 2012 won’t have to exceed a 6’3% instead of the initially foreseen 4%. Nevertheless, precisely because of austerity policies imposed by European authorities and the IMF (and firmly supported by the Spanish cabinet) the deficit in 2012 will be notably higher as well as in 2013 and 2014. So, everybody lies or everybody seems to believe their own lies.

Public spending has been reduced: thousands of public employees have been fired or their salaries have been lowered, national health and education systems have suffered deep cuts and the budget of other policies has been reduced as R&D (-20%) or development cooperation (-72%). Only two main budgetary headlines increases: unemployment benefits (even when the coverage rate of unemployed people receiving benefits is lower than previous years) and the interest payment of the public debt. It’s remarkable that, for the first time in the budgetary history of Spain, the interest payment of the debt is higher than the wages of all public employees (state, regional and local administrations). So regarding to public expenditure requirements the Spanish government is doing its homework.

What about of incomes?  First of all, TVA and Personal Income Tax were raised in the last six months.  Nevertheless public incomes have abruptly fallen as consequence of austerity policies. Private consumption is in coma due to 25% of unemployment and lower salaries. For instance, sales of new cars have been fallen continuously for the last 27 months. Car sales are now 70% lower than before the onset of the crisis (they are even bellow of Moroccan levels). So the collection from TVA and Personal Income Tax is fallen. It is estimated that the Spanish Tax Administration has lost 70 bn € (7% of Spanish GDP) due to austerity policies.

Incomes from corporate income tax also are at a very low level due to the lack of economic activity. However, it’s worth underlying some aspects of those taxes. Nominal corporate taxes are around 20-25%, depending on the size of the firm, but real taxation rate –after deductions- is 11’4%. In other words, taxation on workers is much higher than capital one and real corporate taxation in Spain is lower than in Ireland. Furthermore, the Spanish government rejects to introduce property or inheritance taxes.

The conclusions are evident. First of all, the solution to budgetary problems is not in outcomes but in incomes and then, the crisis is being used to transfer employment incomes to capital incomes.

We are facing a peculiar kind of vicious circle. Radical austerity policies are implemented to reduce the public deficit but those policies avoid reducing the public deficit so new austerity policies are adopted. How long and how far this “liar’s game” will go? Meanwhile the countdown of the social time bomb is going on.

LAST ENTRY ON UNEMPLOYMENT BENEFITS

The blog restarts the activity after two months “out of duty” and we’ll try to put an end to a former question: what happen when the right to perceive regular unemployment benefits (“prestaciones”) ends? What are the choices for unemployed people with no incomes?

The answer is not easy; there are several different aids in cash under the umbrella of the so called “subsidio por desempleo”. Some of them are targeted to specific groups as rural workers from Andalusia or Extremadura, prisoners after their release, Spanish immigrants in no-European countries which decide to come back home… Now we’ll summarize the most usual cases. But first of all, some preliminary comments:

• There are an increasing number of unemployed people which don’t perceive neither “prestaciones” nor “subsidios por desempleo”.
• In August, the Spanish Government has strengthened the conditionality to access to “subsidios”.
• The most of the times “subsidios” are linked to be the only income of the household. What does it mean? Let see! A young unemployed perceives a 426 € monthly amount “subsidio” so he decides to come back to his parents home. At this moment he’ll lost his “subsidio”.
• The amount of the “subsidio” usually is the 80% of the Public Index of Multiple Incomes (IPREM).

Beneficiary	Duration	Amount (2012)
Unemployed, under 45 years, finished their unemployment benefits (prestaciones por desempleo) and family responsabilities	18 – 24 months	426 €
Unemployed, over 45 years, finished their unemployment  benefits (prestaciones por desempleo) and family responsabilities	24 – 30 months	426 €
Unemployed, over 45 years, finished their unemployment benefits (prestaciones por desempleo) and no family responsabilities	6 months	426 €
Unemployed, without previous right to perceive unemployment benefits and no family responsabilities	3 – 6 months	426 €
Unemployed, over 45 years, finished their unemployed benefits (prestaciones por desempleo) and family responsabilities	21 months	426 €
Unemployed people over 55 years old	unlimited	426 €

So to be a Spanish unemployed isn’t a good business. Furthermore, more and more Spanish unemployed are under the poverty threshold.