The EU gives a wake-up call to Spain for the “high” level of unemployment and debt


The European Commission once again warned Spain about the risks derived from the high level of public and private debt, as well as high unemployment, three indicators that the institution has identified for years as the main dangers of the Spanish economy. This is stated in the report on macroeconomic imbalances that the Community Executive published this Tuesday within its call Fall Packin which it outlines the main challenges for the Member States facing 2023 which, according to the forecasts of the community authorities, will begin with two quarters of contraction in the euro area.

In particular, Brussels points out in the document that Spain’s “fiscal sustainability risks” persist in the medium and long term “partly due to the costs of the aging of the population” and despite the fact that both the public debt and deficit are on a downward path that the institution also projects throughout 2022 and 2023 (in 2021 they closed at the 118.3% and 6.9% of GDP, respectively.

Regarding the debt of non-financial companies, the European Commission highlights that moderated to 80% in 2021 and continued on this path in the first half of this year, but adds that “there are risks associated with the macroeconomic environment”, as well as that it continues “above the thresholds” established as prudent, as is the debt of Spanish households.

“The weaknesses in the labor market continue to be a concern, despite the notable improvements,” added the economic services of the Community Executive, before stressing that “the unemployment rate fell substantially over the last decade but remains among the highest in the EU“. Within this chapter, Brussels places the accent on youth and long-term unemployment.

Regarding the competitiveness of the Spanish economy, the imbalances report indicates that Unit labor costs (ULC) increased “slightly” in 2021 “and are expected to grow further with rising inflation. Despite this, the document points out that the doubts related to the costs of competitiveness continue to be “limited”.

Yes, it causes more concern. the net international investment position of the Spanish economywhich is still negative (-71.5% of GDP in 2021) although it has improved “substantially” due to “strong positive value effects and high nominal GDP growth”. In this line, the Community Executive highlights that the current account balance continues to hold the surplus (1.2% of GDP in 2021)but it is expected to decrease slightly, with the services sector partially compensating for the deterioration in trade in goods, services and energy.

In all, the European Commission has identified macroeconomic imbalances that will monitor “in depth” over the next few months in 17 Member States (besides Spain, in Cyprus, France, Germany, Greece, Italy, the Netherlands, Portugal, Romania, Sweden, the Czech Republic, Estonia, Hungary, Latvia and Lithuania).


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