Generation lost?

Karen Kissane, Madrid
Published: September 8, 2012 – 3:00AM

WHEN Eva Valiente finished her university studies in advertising, she fired off written applications to 200 companies in Madrid. She did not get a single reply. So Valiente got part-time work with a chain of fashion shops. They sacked her when she turned 25 – she was too old for their look now, they said.

”It is illegal but the laws are weak for beginning people,” she says, with the hard-earned wisdom of a 26-year-old.

She tells of a friend who was offered a ”job” in which she would work from 9am to 9pm five days a week – and get no salary for a year. Talking of the desperation of young Spaniards for work, she says ”it’s for crying.”

Spain’s youth unemployment rate is a staggering 53 per cent, the highest in the 17-member eurozone. Among the jobless are Valiente’s boyfriend, a qualified lawyer who has never had work in his field, and two of her sisters: one a graphic designer who has never worked and the other a psychologist who recently lost her job. All of this in a middle-class, educated family – Valiente’s father is a doctor.

The eurozone now has a total of 3.3 million young people who cannot find work. Leading this dismal set of statistics are Spain and its fellow victim of financial crisis, Greece (52.8 per cent). With half the eurozone nations in recession, there are now enough unemployed people of all ages to make up a middling-sized country: 25 million.

There are warnings of a ”lost generation” from the Organisation of Economic Co-operation and Development. In a report in July, it demanded urgent action to stop the cyclic jobless problem becoming permanent, particularly for young people. ”We need to avoid the risk of a lost generation by all means,” said OECD Secretary-General Angel Gurria.

An alarming report by the World Economic Forum, Global Risks 2012, used even tougher language. It warns that with unemployment and systemic financial crises, the world is sowing ”the seeds of dystopia”, defined as ”the opposite of utopia, a place where life is full of hardship and devoid of hope”.

The report, based on the views of 469 leaders from industry, government, academia and NGOs, warned that rapid global changes risked producing misery for much of humanity. The risks included ”a large youth population [that] contends with chronic, high levels of unemployment, while concurrently the largest population of retirees in history becomes dependent upon already heavily indebted governments.

”Both young and old could face an income gap, as well as a skills gap so wide as to threaten social and political stability.”

Declining economic conditions could jeopardise the social contracts between states and citizens and increase nationalism and populism. The Forum warned of the emergence of ”critical fragile states – formerly wealthy countries that descend into lawlessness and unrest as they become unable to meet their social and fiscal obligations”.

The number one risk to global stability, according to the report? Major systemic financial failure – that is, the collapse of finance or banking institutions, or even a whole currency.

All of which leads back to Spain and its potential to wreak economic disaster upon the rest of Europe and, perhaps, the world.

Madrid does not look like the capital of a struggling nation. Its broad, proud boulevards and graceful old buildings speak of majestic confidence. Its pavements are smooth and its many public gardens green and manicured, despite a summer so hot that there have been bushfires in the provinces. Madrid does not seem to have in any numbers beggars such as the Romanies on Parisian streets, or the English homeless holding out plastic cups for coins in London.

But Spain is suffering. While Greece’s public writhing under the agonies of austerity in a recession has been the focus of headlines, this is because if the eurozone falls, Greece is likely to be the first domino. In many ways, however, Spain is the bigger worry.

Greece is a small nation and accounts for only 3 per cent of the eurozone economy. While its exit from the euro might trigger a crisis of confidence in Europe’s financial markets, the euro would have a chance of surviving it. But Spain is Europe’s fourth-largest economy and is widely considered too big to bail.

That did not stop the European Central Bank deciding in June to lend Spain up to €100 billion to help its struggling banks in an attempt to ward off a more serious emergency.

Spain is in financial crisis – and Valiente and her family and friends are out of work – because of what Spaniards call ”the brick bubble”. When Spain joined the euro, credit became cheap as the European Central Bank kept interest rates low for the whole zone. Spaniards bought property, leading to a construction boom. In 2007 came the bust.

Credit tightened. People stopped buying. The value of houses plummeted, some by more than 50 per cent, leaving many people owing big mortgages worth more than the property involved. Banks found themselves weighed down with mortgage defaults and toxic assets worth a fraction of their previous value. The countryside is dotted with ghost towns, huge housing developments that remain unfinished and unsold. Federal and regional governments that had spent big as revenues flowed found themselves unable to balance budgets.

The human cost is dire. Spain now has 1.7 million households in which no one is working, and the government says it does not expect joblessness to fall below 22 per cent until at least 2015.

For Valiente and others like her, this means adult life is on hold indefinitely. She and her boyfriend would like to live together but they can’t afford it, she says in frustration: ”You can’t leave home. You can’t be in a couple. You can’t be a mother. You feel like you are too old for everything, but at the same time, you have to live like you’re a 15-year-old. You live with your parents; you live like a teenager.”

This pattern of delayed adult milestones is also showing up in statistics, says sociologist Almudena Moreno Minguez of Valladolid University. ”If you compare us with other European countries, Spaniards are now marrying three or four years later, on average, and having children six or seven years later.”

This is partly because many of those aged between 25 and 34 who moved out of home a few years ago when they started work are returning because they’re unemployed and broke. Parents call them ”boomerangs”, she says.

”The parents aren’t happy. There comes a point when even the family cannot support another three or four members at home.”

She says research shows that young people are feeling angry and alienated from the formal structures of society; they feel they have no voice in the deciding of public affairs. Recent improvements to welfare benefits did not include them, she says, and Spain spends less of its GDP on training and education than the rest of the eurozone.

Many Spaniards talk with disdain of the ”botellones” (from the word for big bottles) – young people who gather at night in public places to drink and party because they can’t afford clubs or bars.

Moreno says, ”Even worse than not investing in them, people here try to make them feel guilty. ‘You are responsible for this situation.’ It’s like they have spat them out.”

A survey of young people aged 15 to 29 asked them to rank different institutions according to how well they respected them. Moreno says, ”They gave justice 3, unions 4.5 – and politicians 2.”

Their disdain for politicians is shared by their elders. Newspaper columnist Luis del Pino, who contributes to El Mundo, says Spaniards have an old saying, ”Two things are bad for your health – politicians and smoking, in that order.”

He says ”legal” political corruption is to blame for many of the financial problems. Regional politicians manipulated local banks to encourage finance for local projects: ”They put boards of directors that oriented these savings banks towards giving credit to big construction companies who were friends of the politicians. All this subsequently collapsed.”

Four Spanish banks that have been part-nationalised because of toxic debts have at least €71 billion ($A87 billion) in bad loans on their books.

Politicians also made many political appointments to get friends and supporters on the public payroll, he says. ”Mayors and ministers have a total of 17,000 ‘personal advisers’, according to my colleagues at El Mundo. That’s an €850 million expense each year.”

And some politicians also manipulated the ”brick bubble” for personal profit, buying land they knew was to be rezoned and reselling it for many times the original value, he says.

But Spain also has tight labour

laws that need reform. Both right-wing and left-wing economists agree regulations, generous but not all unreasonable in boom times, now serve to lock young people out of work.

Sick employees can get most or all of their wages for 18 months. Employees can only be sacked without a payout in the first year, and many long-serving staff would cost €80,000 or more to let go. Businesses stay small because once they reach 50 employees, they must have five workplace reps to bargain on wages and conditions, each of whom receive 15 paid hours a month for these duties. Companies also pay higher rates of tax once they have more than 25 staff.

Inigo del Toro Calonje lost his job as an environmental engineer with a company designing golf courses when the boom bust. Golf courses had sprung up to add value to housing developments in the middle of nowhere but suddenly his company’s clients stopped paying and Calonje, unable to find another job, decided to set up his own consultancy.

It cost him €4000 and took three months to set it up to comply with government regulations. He earns only 60 per cent of what he earned as an employee but must pay company taxes each month and is driven mad by the different environmental regulations in Spain’s 17 regions. ”They punish us for trying to be independent,” he says.

He is not the only one feeling punished by ”la crisis”. ”Social instability is a risk because we will have a large group of young unemployed for a long, long time,” warns Almudena Moreno (pictured). ”It will produce social conflict and the social structure will break down because young people don’t see any future; they don’t see any solution. What is going to happen in three or four years if we don’t find a solution?

”Here, democracy is quite young. It’s less than 40 years [since dictator General Franco died], it’s nothing. Our structures are quite weak. It’s hard to predict but if groups such as the long-term unemployed, the young people with no future and the people who have been evicted join together, their social power could be terrible, and dangerous too.”

Luis del Pino is another who can foresee potential trouble. He warns of the ”amazing speed” with which the middle class, the backbone of any developed society, is disappearing.

”It would be a disaster if this led to the rise of political extremism. Franco is within living memory here. When you put several million people in a desperate enough situation, then they will hear anyone who promises them some hope, even if that anyone is the most despicable man.”

Right now, those questions are too big for most of the young jobless, for whom the main question is where to go next. Many are considering joining the tens of thousands leaving the country to seek fortune in foreign lands.

Enrique Melendez, 30, who lost his job writing for a public relations firm, is thinking about migrating to South America. It’s far away but they speak Spanish there, he says.

He is grateful to have worked at all: ”At least the people around 30 had a job and lost it. At least we have had the experience of work. It’s more dangerous for the next ones coming behind us, who’ve never had a job and have no experience.”

Eva Valiente is wondering about moving too. She has two ideas; to become a cook and move to a rural town – ”life is cheaper there” – or to go to England and improve her English and, therefore, her saleability. Maybe both. She cannot see anything changing for her in Madrid any time soon: ”They say the crisis will go on for five or 10 years. I don’t know. Young people are very sad.”

Karen Kissane is Europe correspondent.

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