Spain: Unemployment increased again during August

Spanish Ministry of Labor announced that unemployment rate increased by 1.5% during August, after the drop that was recorded in the four previous months. The number of unemployed at the end of August reached 3.97 million which is 9.3% (or 340,581 unemployed) increase compared to last year. According to Eurostat, Spain recorded the highest unemployment rate in the euro area: 20.3%, while the average was 10% for the month of July.

“Usually, unemployment rates begin to rise as the summer ends”, said Minister of Economy Elena Salgado to an interview to the Cadena Ser radio station. However, she appeared optimistic as she noted that “current data suggest that the labor market begins to stabilize. This means better news in the area of unemployment to the coming months”. The Spanish Minister of Economy also stated that the increase of VAT helped the country to almost half the budget deficit during the first 7 months of 2010, a clear indication that the austerity measures are successful.

In May, the government adopted a package of austerity measures amounting to 15 billion Euros for 2010 and 2011, including reduction in government salaries, zero increase in pensions and increased VAT by two percentage points to 18%. The Spanish economy emerged from an 18 months recession in the first quarter of 2010 and the government now expects growth in all quarters of this year. However, international economists and analysts do not share the optimism of the Spanish government as they estimate that it is extremely difficult to meet the targeted objectives.