Spain Economy

Spain, located in Southwestern Europe, is bordered by the North Atlantic Ocean, Mediterranean Sea and Pyrenees Mountains. With a total area of 505,370 sq km, Spain is the 51^st largest country in the world. The nation has a total population of 40,525,002, according to the 2009 CIA World Factsheet reports. Of the total population, the labor force in Spain’s economy is nearly half, at 22.97 million.

Spain Economy: Overview

Spain’s economy, which is mixed capitalist, is the 12th biggest economy in the world. In terms of per capita income, Spain is almost at par with the strong economies of Germany and France. Between 1994 and 2008, the Spanish economy grew steadily. However, Spain was considerably affected by the global financial crisis of 2007. The crisis exacerbated the nation’s GDP, and the economy entered recession during the third quarter of 2008. In fact, Spain’s GDP growth during 2009 dropped to a mere 1.2%, which was well below the minimum 2% growth enjoyed by the nation for a decade before the crisis.

Spain Economy: Employment Status

The Spanish economy has suffered from high unemployment levels for several decades. The nation’s government undertook several measures to curtail the unemployment scenario, and succeeded in lowering it to 8% during 2007. However, post-recession, the unemployment level spiked to almost 14% by the end of 2008. According to CIA reports, the unemployment level in the Spanish economy reached a record high of 18.1% during 2009. Some reasons for Spain’s dismal unemployment scenario are:

• Spain’s rigid labor regulations, which result in unresponsiveness of wages to high unemployment levels. Consequently, during a weak economy, employers in Spain are forced to layoff laborers and cut-down hiring, rather than cut their wages.
• Overly generous unemployment-benefit schemes, which make unemployed individuals casual about job hunting. Moreover, high unemployment benefits tend to push the wages up, discouraging firms from employing more individuals.

Another key reason for high unemployment levels in Spain is its rapid modernization, resulting in declining employment in the agricultural sector and other traditional basic industries.