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Spain has a two-speed economy with high unemployment – The Economist

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A DENSE, COMPACT town of 58,000 people near the gateway to Andalucía from Spain’s central plateau, Linares has been successively a centre of lead mining, a railway hub and the site of a large factory making Santana jeeps. Today it is a town with a reputation: at 33%, its unemployment rate is the highest in Spain. The Santana factory, with more than 2,000 jobs in its heyday, closed in 2011. High-speed trains to Seville and Granada bypass Linares. A large Corte Inglés department store closed in March and stands in the main square, decaying like a rotten tooth. Inditex, a fast-fashion giant, recently closed most of its shops in the town too. “I’ve been looking for work for months,” says Carlos Márquez, aged 21, who was laid off from his pre-pandemic job, selling mobile phones in a hypermarket. “There’s nothing in Linares. I would have to go somewhere else.”

The town’s reputation is overdone, insists Raúl Caro-Accino, the mayor. He points to technology businesses in industrial estates on the outskirts, with more to come, many drawn by the presence of the technology faculty of the University of Jaén. Its level of unemployment is in line with other places in southern and western Spain, the mayor insists. “We have a problem of unqualified labour,” he admits. And that goes for much of the country.

Long before the pandemic, Spain stood out in Europe for its chronically high unemployment, especially among young people, and for the high number of workers on temporary contracts (currently 25% of all those with jobs). The slump occasioned by the financial crisis of 2007-09 saw millions join the ranks of the jobless, though it was followed by a strong recovery (see chart). Now the pandemic has hit Spain’s economy harder than its European neighbours once again. That is mainly because of its heavy dependence on tourism and vulnerable small businesses. After stops and starts because of successive waves of covid-19, a strong recovery is under way. But only around half of the foreign tourists who visited in 2019 are likely to come this summer.

There are two bright spots. In contrast to 2007-09, the government was able to take emergency measures, in the form of credit guarantees for firms and a state-supported furlough scheme which at its peak last year paid most of the salaries of 3.4m workers. Only 360,000 still need this help; the rest have gone back to their jobs. “This is the first recession in which employment and tax revenues have fallen less than the fall in GDP,” says Nadia Calviño, the economy minister.

The second boost is that over the next three years Spain is due to receive €70bn ($83bn) in grants from the EU’s Next Generation recovery scheme, along with a similar amount of soft loans. Much of this will go on big projects aimed at creating a greener, more digital economy, such as one for electric cars and a battery factory. But there will be plenty of money, too, for overhauling public administration and vocational training, and for active labour-market policies to help the unemployed find jobs. It is a peerless opportunity to tackle Spain’s chronic joblessness problem.

The aid is tied to a commitment to reforms, especially of the labour market and pensions. And on these matters the left-wing coalition government of Pedro Sánchez is divided. The European Commission reckons Spain needs to make its labour market more flexible while tackling employers’ abuse of temporary contracts. But Yolanda Díaz, the labour minister chosen by Podemos, the coalition’s junior, far-left partner, wants to repeal a 2012 reform. That introduced some flexibility, giving firm-level agreements priority over industry-wide ones and cutting severance pay, though to levels that are still generous. This commitment is backed by the trade unions and is in the coalition agreement between Mr Sánchez’s Socialists and Podemos. Ms Díaz also wants to abolish temporary contracts. “These proposals would lead to the most restrictive and rigid labour-market regime” in Europe, says Marcel Jansen, an economist at Fedea, a think-tank. They risk destroying jobs rather than creating them.

Ms Calviño, a former budget director at the European Commission, leads the government’s reformist wing. She says Spain needs a bundle of measures that strike a balance between flexibility and curbing temporary contracts. She hopes talks with the unions and business will bring agreement on these by the end of this year. In a reshuffle in July she became first deputy prime minister. Since the EU can cut off funds if constructive reforms are not approved, she is likely to prevail over Ms Díaz, though not totally. The unions have influence, too. It is a strength of the Socialists that, unlike some other social-democratic parties, they have retained a working-class base. “It’s very hard for a government with a feeble majority to agree on reforms that comply with the European agenda,” notes Mr Jansen.

To tackle unemployment, training and education need a radical shake-up too. A third of young Spaniards leave school without any qualification, and only a quarter of school-leavers enter vocational training, compared with half in Germany, points out Manuel Pérez-Sala of the Círculo de Empresarios, a business think-tank. Spain spends €6bn a year on active labour-market policies but much of this is wasted. Under European pressure the government recently reinstated a policy of linking the financing of training to results which it had scrapped. New laws on education and training may help, if they are fully implemented.

Another doubt concerns how the EU money is administered. The opposition complains that control is centralised in the Moncloa, the prime-ministerial complex. Regional governments want their share. “I think they have understood that this is a co-ordinated national plan,” says Ms Calviño. Spain has usually been slow to spend EU structural funds, though it does so in the end. In Linares, the mayor is sceptical. “We need a more flexible administrative structure,” he says. “The province is frustrated because it was promised things that didn’t happen.” In the end the success of the EU’s efforts will be judged not just by whether it manages to make the economy greener, but also by whether it endows places like Linares with a more productive workforce.

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Economy

What is a recession? Your economy questions, answered. – The Washington Post

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The U.S. economy is back in the headlines, with more economists and financial experts warning of an impending downturn at some point in the next year. But what is a recession — and what happens during one?

The answers can be complicated and vague.

“Recessions are notoriously hard to predict in advance,” said Tara Sinclair, an economics professor at George Washington University. “It’s pretty easy to say a recession is coming at some point in the future. … It’s much harder to quantify exactly when, how long and how deep.”

For nearly two years, the U.S. economy has notched blockbuster gains, with millions of new jobs and wage hikes adding to the streak of good news. Families and businesses were flush with cash, which they used to buy houses, cars, electronics and other big-ticket items. That extra spending — combined with lingering supply chain shortages and delays from the pandemic — helped drive up prices and contributed to the highest inflation in 40 years.

Now policymakers are trying to tackle some of those skyrocketing prices with higher interest rates. They’re hoping that by making it more expensive for families and businesses to borrow — for investments, homes and cars, for example — that demand for those things will go down. The question is whether they will be able to slow things down just enough, without sending the country into a recession.

Here, we answer some common questions on economic downturns and how they affect Americans.

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Ontario premier Ford vows to rebuild economy, unveils new Cabinet – Reuters.com

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OTTAWA, June 24 (Reuters) – Doug Ford took the oath of office for a second term as the premier of Canada’s most populous province on Friday with a promise to build highways and homes, and rebuild Ontario’s economy.

Ford’s right-leaning Progressive Conservatives returned to power with a sweeping victory in a provincial election on June 2, winning 83 seats in the 124-seat legislature.

He unveiled a larger 30-member Cabinet, moving former solicitor general Sylvia Jones to role of minister of health and deputy premier, while keeping Peter Bethlenfalvy in post as the debt-laden province’s finance minister.

Ford said he had an “ambitious plan” for his second stint, as his government faced challenges posed by inflation rates hitting a nearly 40-year high in Canada.

“That plan starts with rebuilding Ontario’s economy,” Ford said at his swearing-in ceremony.

He reiterated pledges made in the lead-up to the election, including new spending on highways, transit and the auto sector.

“We’re investing to connect every part of our auto supply chain … the cars of the future will be built right here, Ontario, from start to finish,” Ford said.

Ontario, home to just under 40% of Canada’s 38.2 million people, is Canada’s manufacturing heartland. It is also one of the world’s largest sub-sovereign borrowers, with publicly held debt in excess of C$400 billion ($309.6 billion).

Ford also pledged to address soaring home prices in the province by building more affordable housing.

Canada’s national housing agency projects Ontario to be one of the worst affected by a housing shortage over the next decade. Provincial capital Toronto is already one of the most expensive cities to live in globally.

“Too many families are frozen out of the housing market … we need to build more attainable homes,” Ford said.

($1 = 1.2921 Canadian dollars)

(This story was refiled to fix typo in headline)

Reporting by Ismail Shakil in Ottawa

Our Standards: The Thomson Reuters Trust Principles.

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Northern Shootout's return provides a big boost to Orillia's economy – CTV News Barrie

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The return of an annual slo-pitch softball event marks the unofficial start of summer in Orillia.

The Northern Shootout is back for its 13 edition after a pandemic-driven hiatus.

The tournament consists of 78 men’s, women’s and co-ed teams from Ontario and Quebec and promises a big boost to the economy in the city.

“Especially after two years of pandemic restrictions,” said Mike Ladouceur, City of Orillia. “This helps our tourism recover, puts heads in beds, hotels are filled, restaurants filled, this is really the big event that begins our summer of events.”

Organizer Mike Borrelli said the tournament has grown to become one of the biggest in Canada.

“We’re pretty much at capacity for participants. We can’t accommodate anymore,” he added. “We’re using the other diamonds, we got all the diamonds in Orillia, and we’re using the Rama diamond, so if we had more diamonds, we could accommodate more teams.”

The owners of Adovo Pizza in Orillia say the increase in tourism has done wonders for their business this year.

This being the first big event of the season, they’re excited to welcome so many people into the city.

“Everyone has just been waiting to get out,” said Adam Zimmerman, co-owner. “Especially for sporting events and vendors, have a cold beer. There’s nothing wrong with it.”

The tournament culminates with an annual home run derby, which organizers said typically draws 1,200 fans to watch.

Sixteen participants will compete to walk away with a championship belt.

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