Economics update from John Birchall
In what are affectionately known as the ‘olive oil’ economies things are beginning to hot up. That would be nice if we were referring to temperatures but the ‘heat’ is being generated by the economy, or to be more accurate the lack of it!
Let’s start in Spain, still the most popular holiday destinations for British tourists in search of some sun. Spain's unemployment rate has hit 20% for the first time in nearly 13 years there were 4,612,700 people unemployed in the country at the end of March. Spain's jobless rate has risen sharply during the economic downturn and is the highest in the euro zone, the official European Union (EU) figures showed that the euro zone unemployment rate remained unchanged at 10% in March. This equates to 15.8m people and within the wider EU, the jobless rate was 9.6%, with 23.1m people unemployed. Germany was the only country where the jobless rate fell, from 7.4% to 7.3%.
Portugal is under pressure to convince investors that its public finances are under control - a tough job for the Socialist government after the country's credit rating was downgraded. In 2009 Portugal's budget deficit reached 9.3% of gross domestic product and the public debt rose to 77% of GDP. The Greek economy is still deep in recession and on Sunday the government forecast that GDP would fall by 4% in 2010. The country's national debt - currently at about 115% of GDP - would rise to 149% by 2013 before falling. Put bluntly Greece owes more than one years GDP or National Income. The austerity plan aims to achieve fresh budget cuts of 30bn euros over three years - with the goal of cutting Greece's public deficit to less than 3% of GDP by 2014. It currently stands at 13.6%. Measures include scrapping bonus payments for public sector workers and raising VAT. Italy’s economy shrank by 0.2 percent in the fourth quarter of 2009, inverting the growth it had experienced in the third quarter, according to national statistics agency Istat in a preliminary forecast. Italian gross domestic product (GDP) shrank by 0.2 percent compared to the third quarter when adjusted for seasonal variations.
So, it’s not good news in Southern Europe and most eyes are on Athens and the success, or otherwise of the government to reign in public spending, whilct keeping angry and frightened employees happy and off the streets.
But as you will note, the authorities in Italy, Portugal and Spain are all set for a difficult summer and beyond.
The risk of a country NOT paying its sovereign debt.
Whatever our weather and all the election fuss it does look as though our cool, rainy Spring may be just the place to be!
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