As Greece stares into the abyss, has Spain escaped from crisis?

Sunlight over central Madrid

Daniel Roman is feeling upbeat. Six months ago, the 38-year-old sommelier opened a small wine shop in the Mercado de la Cebada, a covered market in Madrid’s trendy La Latina neighbourhood. “I’m confident,” he says, as he serves two elderly customers from the counter. “Opening here was the natural next step for me. I’ve always wanted to build something of my own.”

The statistics would indicate he has every reason to feel cheerful. Spain’s economy appears to be emerging at full throttle from one of the longest and deepest recessions it has ever suffered. An IMF report said growth by the end of this year will be a startling 3.1%, leading to job creation, and, in theory at least, a better standard of living for Spaniards who have suffered crippling levels of unemployment and decline over the lastseven years.

But like many Spaniards, Roman’s optimism does not stem from a faith that Spain’s economic woes are necessarily over. His working day starts at 9am and he gets home after midnight, dividing his time into four shifts between the shop and the restaurant he still works in.

“For me, I’m in a good place. I’m breaking even in the shop and that’s pretty good,” he says. “But the economy has become a psychological problem. People have been in trouble for so long that they cannot find reasons to be confident. Everyone is told that the economy is improving, but they don’t necessarily believe it.”

Crushing losses in recent local elections for prime minister Mariano Rajoy’s governing People’s party (PP), which has hailed the economic recovery in its pitch to voters, suggest that feeling is widespread. A double-dip recession that sent thousands of businesses to the wall, sapped lending and left millions out of work has left scars so deep that for many people in Spain the turnaround is far from complete.

While the big picture is undoubtedly improving – big investors are returning to a country that barely three years ago was widely expected to need a Greece-style sovereign bailout – Spain is still mired in a period of transition.

Even the IMF report that welcomed Spain’s impressive growth rate – one of the strongest in Europe – also stressed the shaky jobs outlook, noting that unemployment was “still painfully high” and that “vulnerabilities remain”.

“Spain has returned to about 95% of where it was in 2008,” says Professor Javier Diaz-Giménez of the IESE business school in Madrid. “That means 2008 is still a benchmark people look back at with nostalgia. At current growth rates, the economy will get back to where it was in 2008 at the end of next year. It’s a very late recovery.”

One of the biggest worries for those yet to see any improvements in their lives is whether even a sustained recovery will be enough to repair the damage. Jobs are starting to return, currently at a rate of 400,000-500,000 a year, but more than three million were lost during the downturn, so the new jobs represent only a small improvement in an unemployment rate, which is still runningat almost 24%. In Greece, which now finds itself on the edge of the economic precipice, the rate is 26%. Inequalities, meanwhile, are deepening, leaving some to wonder whether the crisis is even over at all.

“The economy is certainly not improving for those without a job or a home,” says Lotta Tenhunen, a social activist in Vallecas, a less-wealthy district of Madrid. The group she works with, PAH, campaigns on behalf of those evicted after falling into arrears on their mortgage payments, and became especially prominent at the height of the recession. In Vallecas, it still meets every week: “People and families are still being driven out of their homes – and the rate is still rising.”

Daniel Roman his wine shop in the Mercado de la Cebada.

Daniel Roman in his wine shop in the Mercado de la Cebada. ‘I’m breaking even and that’s pretty good.’ Photograph: Alistair Dawber

Prospects for the young are particularly bleak. About half of under-25-year-olds in the labour force are without a job, and this threatens to leave the country with a listless lost generation for whom unemployment is the norm. The ranks of the long-term jobless are also swelling.

“It is not just the headline unemployment figure that is worrying; it is also the type of unemployment,” says Antonio Barroso of consultancy Teneo Intelligence. “Forty per cent of unemployed people are over the age of 45, so difficult to retrain and bring back into the labour market. You also have to look at the types of jobs being created. Most new positions are temporary contracts, where people are left in a precarious position with very few rights – this does not breed confidence.”

For self-starters such as Roman, government attempts to cut red tape for new businesses have been one encouraging change. Thousands of Spaniards have been setting up on their own, adding to the growing numbers of the self-employed as they pin their hopes on a recovery in consumption. Near Roman’s shop, gourmet bakeries and swanky bars are popping up, just beginning to replace the boarded-up outlets that plagued the neighbourhood in the downturn.

Finding the means to get going as an entrepreneur is still a challenge, however, in an era of constrained bank lending. For those unable to start a business, it is still not clear where a major job recovery touted by the centre-right PP is going to come from.

A tourism boom is helping as retailers and hotels take on seasonal staff, and some industrial sectors, including car manufacturing, are on the up. But going back to the growth model of the past is not an option. Spain’s economy – built for years on cheap debt and a housebuilding bubble – imploded amid the credit crisis of 2008. Its banks, to that point happy to lend to all comers, later required a €40bn bailout from Brussels.

Several favourable tailwinds are now helping a turnaround: the weak euro has helped exporters find new foreign markets to compensate for a lack of domestic interest; a weak oil price is keeping business costs down; and pan-eurozone policies designed to reflate the economy, such as the ECB’s quantitative easing programme, have helped to stimulate demand. War in the Middle East helps the holiday industry, but the benefits are not trickling down fast enough to ordinary Spaniards. Small business owners treat any suggestion that the crisis is over with scepticism.

“Looking back, 2006 and 2007 seem like a mirage in the desert,” says Victoria Bazaga, who runs Hotel la Encarnación, a picturesque bed-and-breakfast near the Unesco-recognised town of Cáceres in the western Extremadura region. “Things now are almost the same as they have been for the past few years, only now we’re accustomed to a new reality. It’s as if I went to live in London and spent the first few months complaining about the weather. Six years on and we have adapted to it.”

Even the beleaguered property market is showing signs of life, though experts say a lot of the demand is coming from overseas, as the weaker euro attracts buyers from northern Europe looking for homes in tourist resorts.

“The international market is doing very well indeed, but the local market is very different. There is no domestic demand at all,” says Marc Pritchard, Majorca-based sales and marketing director of Taylor Wimpey España, which builds homes in popular coastal areas.

Banks are not giving mortgages to many Spanish customers, he adds, and smaller property developers are struggling to get funding after so many went bankrupt during the crisis.

Others in Spain’s property sector report similar trends. Martin Dell, who runs a property listing website,, says interest from locals has collapsed: “The facts speak for themselves. In December 2007, 26% of all our inquiries came from Spanish speakers. That figure is now just 2%.”

The lagging recovery for many Spaniards spells trouble for the PP: a general election is due by the end of the year. Recent corruption scandals were another factor in its poor showing in the local elections. This has opened the way for new parties, such as Podemos on the left and the liberal-minded Ciudadanos.

Like the Conservatives in Britain, the PP, which has been in office since the end of 2011, sticks to its message on the economy: we know it has been bad, they say, but the medicine is working and things are getting better.

It argues it has held off an even worse crisis as it tries to reduce the deficit, calm investors and lower Spain’s borrowing costs. Reforms, including changes to employment law to make it easier for firms to hire and fire staff, have given firms much-needed flexibility, it argues.

But it will need to do more to convince many voters. “Spaniards know there is a disconnect between the macro picture and what they are feeling. Usually when things are going well, people feel better. The [current] 3% [growth] is barely the start of what is needed to make up what has been lost,” says Angel Talavera of consultancy Oxford Economics.

Many in Spain are already resigned to the idea the boom years will never return. For individuals and businesses, the struggle looks set to continue whatever the outcome of the vote this year.

Daniel Roman’s new venture may well take off, and his personal situation may improve as he works all the hours available to him. But save for his shop, and a handful of grocers, butchers and fishmongers, the Mercado de la Cebada is still all but shuttered. If it is an example of an improving Spanish economy, it still has a long way to go.


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