Spaniards brace for tough year as crisis deepens

The unemployed mason bought a cigarette lighter from a kiosk, walked a few blocks, doused himself with petrol and set himself on fire in front of a hospital in the southern Spanish city of Malaga. The desperate act of the 57-year-old father of two, who died last week, set the tone for a year that Prime Minister Mariano Rajoy admitted will be a “tough one” for crisis-hit Spain.

The kiosk owner who used to chat with the mason said he had looked depressed, had massive debts and “no money even for food”. The eurozone’s fourth-largest economy – far bigger than that of bailed-out Greece, Portugal and Ireland – is expected to continue shrinking at a rate of about 1.5 per cent.

A quarter of the workforce and half of potential workers aged under 25 have no jobs. The number of registered job seekers went down by about 60,000 in December, but that was attributed mainly to a temporary increase in activity during the Christmas season.

There are some hopeful signs. The country’s debt-ridden, semi-autonomous regions have reduced their budget deficits, and the state trimmed its external debt from 170 per cent of gross domestic product (GDP) to 166 per cent between June and September. But debt payments still devour about a quarter of the budget, piling pressure on Rajoy to seek a eurozone financial rescue that would allow the European Central Bank to buy Spanish bonds in order to keep borrowing costs down.

Rajoy is still hoping to avoid the rescue, which would come with strict conditions, forcing him to impose new austerity measures on a country that feels it cannot take any more. Spain was hit hard by the meltdown of its property market, which killed hundreds of thousands of jobs and left residents and banks burdened with toxic loans and assets. The government has poured tens of billions of euros into the country’s troubled banks, which the eurozone is also propping up with about 40 billion euros (52 billion dollars) in aid.

Rajoy has hiked taxes and cut social spending to the extent that many Spaniards see the welfare system as being in danger.

Hospital wards have been closed, sick people need to increasingly pay for their medication and ambulance transport, and doctors have struck work amid plans by the Madrid region to place hospitals under private management. Demonstrators have taken to the streets over schools losing teachers and hundreds of thousands of people being evicted from their homes over unpaid mortgages.

“I keep waking up in sweat at night. The mere thought of my debts makes my stomach ache,” said an unemployed engineer. “I escape reality by watching television all day. I dread a phone call from my landlady whom I expect to evict me over unpaid rent.” Growing numbers of former middle-class people presenting themselves as “crisis victims” can be seen begging in Madrid. Ragged figures sleep on benches and rummage through garbage bins.

The National Statistics Institute puts the number of homeless people at nearly 23,000. That is twice as many as in 2008, and the real figure is thought to be higher. Nearly 40 per cent of Spaniards could live in poverty by 2022, the non-governmental organisation Intermon Oxfam recently warned.

Opinion polls reflect a deep distrust in the authorities, while ordinary people increasingly turn to each other for help. “My in-laws saved my family from homelessness by taking us in,” a former advertising executive said. A Madrid teacher said: “I spend hundreds of euros a month to feed unemployed friends, though I could really use the money myself.” Websites and radio programmes help people to exchange goods and services without using money. Spain had only seen comparable waves of solidarity in times of war, the daily El Pais wrote.

Calls are mounting for the government to boost employment and public investment instead of just cutting costs. The European Union is expected to relax Spain’s 2013 budget deficit target of 4.5 per cent of GDP, which is thought to be impossible for Rajoy to meet. Even the relaxed target, however, will leave the premier little margin for manoeuvre. The government expects the economy to gradually begin improving in the second half of this year. For the man in Malaga – and several others who took their lives over economic problems – that will come too late.