Spain lost almost 140,000 jobs in December, pushing unemployment to 3.1m or 13.4pc. The Labour Office said the country had shed a million in jobs in 2008 as the building boom collapsed. This is equivalent to 7m job losses in the United States.
The Labour Secretary Maravillas Rojo said she could not rule out a rise in unemployment to 4m this year. "We are in an unprecedented situation, and 2009 is going to be very difficult," she said.Madrid now has its hands tied under the constraints of monetary union. It cannot slash interest rates or devalue, and it has already exhausted its scope for fiscal stimulus under the EU's Stability Pact.
There has to be flexibility in the economy: if you're not going to get it from interest rates and an exchange rate that suits local conditions, then you're going to have to get it the difficult way, through mass unemployment.
Better to have the interest rate and exchange rate flexibility, don't you think?