 Reducing Spanish unemployment under the EMUOlivier Blanchard and Juan F Jimeno No 99-02, Working Papers from FEDEA Abstract: Spain enter the EMU with an unemployment rate roughly ten percentage Points higher than the Euro average - 19% versus 9%. Can it reasonably hope to eliminate this differential and join its Euro partners in further lowering unemployment? If so, how long will it take? And what will it take? The Spanish economy has grown at close to 3% per year, and the unemployment rate has fallen by 4 points, from 23% in 1995 to 19% in 1998. This has given hope to those who think that unemployment can indeed be lowered at a steady pace. However, Spain has just gone on the Euro. Spain will now have the same interest rate as its Euro-partners. And the margin of maneuver on the other macroeconomic instrument, fiscal policy, will reamin very limited. Spain will have to decrease its unemployment rate, with one of its two hand to decrease its unemployment rate, with one of its two hands tied behind its back. This seems a tough challenge. First, Spain has to grow much faster than its Euro-partners. Second, this growth has to meet some conditions. Banced growth requires a change in the composition of demand, a lower share of consumption and government expenditures and a higher share of investment. Moreover, Spain will have to achieve a lower inflation rate than its partners, perhaps even deflation. The least it can be said is that it may not be easy. There lies the challenge facing Spain under EMU. New Economics Papers: this item is included in nep-lab and nep-ltv Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fda:fdaddt:9902 Access Statistics for this paper More papers in Working Papers from FEDEA |
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