JEFFREY BROWN: Next: Europe’s economic turmoil.
Today, regulators released the results of a stress test designed to check the strength of Europe’s banking system. Though much skepticism persists, the majority of banks did pass. Seven didn’t, including five small savings banks in Spain.
And that is where “NewsHour” economics correspondent Paul Solman wraps up his weeklong series. It’s all part of his reporting on Making Sense of financial news.
PAUL SOLMAN: Spain, whose mounting debts, public and private, now vie for attention with the views here in the world’s second most touristed country.
But while the tourists in Barcelona and Madrid eagerly preserve their trip, investors are running scared. Millions are out of work here. More and more young people are thinking of emigrating or dropping out of the economy entirely.
Spain’s most prosperous region is again pushing secession. In short, will Spain hold together, or might the music stop for the world’s ninth largest economy?
Unemployment first — it’s higher than in Greece, at 20 percent, near depression levels. Even long-prosperous Barcelona, capital of the Spain’s Catalonia region, is hurting.
At its Plaza Hispaniola (ph), economist DAVID RODRIGUEZ:
DAVID RODRIGUEZ, economist: You will see that there’s a lot of people here that could work, and, right now, they’re here, so standing on the street.
PAUL SOLMAN: In the past decade, immigration to Spain, mostly from Latin America, Africa and Eastern Europe, grew by over 500 percent, to more than 12 percent of the population, mostly drawn by the construction boom.
DAVID RODRIGUEZ: Among immigrant people, people who came since 10 years ago, the unemployment rate is extremely high. It’s close to 40 percent. People from Latin America used to work in construction, used to work building — building homes. That’s why so many people from Latin America are right now unemployed
PAUL SOLMAN: Unemployed due to the collapse of Spain’s key industry, real estate. These men are from the Dominican Republic.
(through translator): Do you have work?
PAUL SOLMAN (through translator): Do you have work?
MAN (through translator): I will try go back to the Dominican Republic, because the situation here is very bad.
PAUL SOLMAN: In a more upscale square, the bursting of, yes, the real estate bubble has stranded a higher, but no less worried, stratum of jobless.
Jordi Gonzalez (ph) lost his construction job in March. No work by next year, and he will be living on 400 euros and unemployment insurance a month, $6,000 a year.
Can you live on 400 euros per month?
PAUL SOLMAN: Impossible?
PAUL SOLMAN: For Spain’s younger generation, unemployment now tops 40 percent.
In suburban Madrid, Andrea Soler is one of those who has a job.
ANDREA SOLER, Spain: I’m lucky. Thank you.
PAUL SOLMAN: But Soler is only one of four in her class with a job since graduating college two years ago from a class of 35.
ANDREA SOLER: I mean, all of us who have tried and looked for work and jobs and stuff, but they can’t seem to find anything.
Soler’s boyfriend, Eduardo (ph), despite several advanced degrees, had to lower his sights.
ANDREA SOLER: He’s a physical therapist, but since he can’t find a job, and we have to pay rent, he’s working at a post office.
PAUL SOLMAN: You’re a mailman?
MAN: I’m a mailman.
PAUL SOLMAN: Their friend Paula (ph) lost her job as a TV cameraperson last year. She is also lucky — to work at a clothing store.
WOMAN: I was a camera, and now I’m selling Dockers.
PAUL SOLMAN: But the vast majority of Soler’s classmates are unemployed.
ANDREA SOLER: Most of our friends live in their parents’ houses, because they can’t pay rent. They’re even thinking going to the States or going to London or somewhere else than in Spain, because they can’t find anything.
PAUL SOLMAN: We found Jordi Perez at Plaza de la Vila de Gracia practicing French, because he plans to emigrate to Quebec.
JORDI PEREZ, Spain: And the prospects in Quebec, in Canada in general are much better than here in Spain, not only in the short, but in the long term, I think.
PAUL SOLMAN: But you’re Catalan? I mean, you’re from Barcelona?
JORDI PEREZ: Yes.
PAUL SOLMAN: But you want out?
JORDI PEREZ: Yes.
PAUL SOLMAN: One Spanish industry is hiring these days. Business has taken off for costumed debt collectors like these who don 17th century monk attire to collect payments. This particular group was hired by local unions to persuade a bankrupt company to pay back salaries to workers.
Meanwhile, some in Spain are beginning to give up on the system completely — at an organic restaurant, boxes of unused food foraged by folks from several local communes. This woman is a teacher who doesn’t take pay.
WOMAN: We can eat from the things that the people just throw away. And we think that’s better than to consume more.
PAUL SOLMAN: I see. So, this is like down — what we call in America down-shifting?
PAUL SOLMAN: Others, older a less able to find community, shun the camera.
While many were disillusioned and discouraged by the dragging economy, Barcelona by day looked like a thriving city, its main attraction, the gaudy Gaudi Cathedral begun in the 1880s by Antoni Gaudi and still under construction, eclectic, elaborate, vast, as is the city itself.
We asked British economist and longtime Barcelona resident Edward Hugh to make sense of the contrast.
EDWARD HUGH, economist: This is a rich city, for reasons of what just happened. But it’s where we’re going that’s going to be the crisis.
PAUL SOLMAN: The reasons for what just happened, like Greece or the U.S. housing bubble, easy money, easy regulation.
And Spain’s first response was the same, too — stimulate the economy with shovel-ready projects, like widening Barcelona’s sidewalks. But now, to avert a debt crisis, Spain, like so much of Europe is cutting back.
Salvador Garcia Ruiz is a banker at La Caixa de Manresa.
SALVADOR GARCIA RUIZ, Caixa Manresa: How can you explain people that you’re going to freeze their pensions, that you’re going to decrease the salaries, while at the same time you’re spending the money just to increase the (INAUDIBLE)?
PAUL SOLMAN: The shovel-readiest project of all, removing Madrid’s statue of Christopher Columbus from one spot in the Plaza Colon and re-erecting it about 300 feet away to the middle of the rotary.
Joan Gallego, Barcelona’s top union leader, is looking for longer-term stimulus.
JOAN CARLES GALLEGO, union official (through translator): This country needs a strategic plan, and this wasn’t one of those. It was a plan with very short-term objectives, superficial.
PAUL SOLMAN: So, it was stupid to move the statue?
JOAN CARLES GALLEGO (through translator): Yes, it was stupid.
PAUL SOLMAN: Finally, secession.
Earlier this month, more than a million Catalonians, long disillusioned with the government, newly energized by its current problems, urged dropping out of the Spanish economy and forming their own.
SALVADOR GARCIA RUIZ: Many Catalans feel that why — I mean, does it make economic sense to be part of Spain, that Spain has so many problems? And, by the way, we are paying so much in taxes, and we are not getting these taxes back.
PAUL SOLMAN: Driving through Barcelona, there’s ample evidence of Catalonian commerce, which accounts for about a fifth of Spain’s economy.
Whereas investors in other countries like Germany are rethinking their investment in Spain, Ruiz argues Catalonians should rethink their connection to Spain.
SALVADOR GARCIA RUIZ: For many years, the Germans and the Catalans have been helping out Spain. The Germans are saying, stop. Many Catalans feel the same. The Germans have the power to do it. The Catalans, we don’t have the power yet.
PAUL SOLMAN: Yet, a catchword wherever we went. Spain has been a patient place. For example, Gaudi’s Sagrada Familia, Sacred Family, isn’t due for completion until 2026. But with austerity cutbacks, 20 percent unemployment, empty real estate on which banks hold shaky loans, what’s next?