Doom & Gloom

The annual Economic and Social report by CRE has predicted unemployment will rise to as high as 20 per cent on the island by the end of the year. The director of the centre, Antonio Riera, said the key was to keep these people on the dole for as little time as possible by investing in retraining programmes and new technologies. 2008 ended with a total of 10,285 in the Pitiusas out of work, a figure which will soar above 16,000 if the CRE’s prediction proves correct.
For Riera the main problem on the island remains the fact that gross domestic product is being reduced year on year. It has, so far, fallen six times over the last eight years, and for the first time in many years now sits below the national average. This has been caused, according to Riera, by Ibiza’s reliance on activities which have not required highly trained staff, which has meant no added value can be placed on the product. Over time this has ensured productivity has not improved. The answer lies in encouraging activities which generate a greater added value, work requiring more qualified people and more competition.
He continued that Ibiza and Formentera had been the least affected of the Balearic Islands by the economic crisis, with the two turning over €2,500 million in 2008. He claimed that while international passenger numbers across the Balearics fell by 10.6 per cent until June, numbers in Ibiza rose by 3.2 per cent although there had been a significant reduction in spend per tourist.
The Balearic Minister for the Economy, Carles Manera, agreed with the report when claiming new technology companies were the only ones which were creating jobs. He said the immediate aim of the Government was to double the number of these types of companies, with the only current facility in Parc Bit, Mallorca.
The Balearic Islands Economic and Social Report 2009 is divided into six blocks that analyze the most important social and economic aspects affecting the Balearic Islands, such as production growth, tourism, prices and monetary variables, employment, demography, immigration, health, home affairs, justice, social services, education, information society, culture and environment. It was created in 2001 by “Sa Nostra” and the Balearic University (UIB), and it is directed by Antoni Riera, head professor of the Department of Economy and business of the same University.
In 2007, the CRE was consolidated as one of the UIB’s own Research Institutes, with the aim of defining a continuous research strategy in the field of Economics, favouring the structure of multi-disciplinary teams in the issues related to Tourism and Environmental Economics. Since being founded, the CRE has developed an active role at a regional level, stimulating and cooperating with various research projects related to aspects and questions specific to the Balearic economy such as tourism, environment, transport and, in a special way, the macro-economic trend of the Balearic archipelago.
Meanwhile, it was predicted by the European Commission that the EU economy would soon be climbing out of recession during the third quarter. However, any recovery will be weak and include rising unemployment and strained government finances.
The second quarter saw both France and Germany return to growth at 0.3 per cent each whilst the EU economy shrank 0.2 per cent.
Despite this positive news Spain’s recovery was predicted to be slow and more drawn out. The report claimed it had not slipped as deep into recession as countries including Finland, Estonia and Latvia, which are currently the three worst performing nations. However, the recovery here will be slow and marked by a continued increase in unemployment as the Government is faced with a difficult decision about when to stop the stimulus package.
Last week Spain’s prime minister, Jose Luis Rodriguez Zapatero, announced tax increases and spending cuts to begin reducing the budget deficit which has grown as the country tries to spend its way out of recession. The prime minister said in a speech to Parliament that the tax burden would rise by as much as 1.5 per cent of gross domestic product – around €15 billion – under a series of fiscal changes. At the same time, he vowed an “exhaustive purge” of all non-essential spending by the central government. He continued by warning parliament of prolonged economic difficulty after the country eventually recovers from the recession.
After months of denying the recession it appears Zapatero is now ready to act, and has changed his upbeat tone of recent months. He acknowledged that Spain would face a lengthy period of high unemployment and economic difficulty even after it pulls out of recession, whilst promising to cut government spending by 4.5 per cent, or €8.6 billion. Exactly which taxes are to be raised remains a mystery, although he promised it would not be income tax.