Spanish Prime Minister Pedro Sánchez has presided over the EU’s worst-managed economy in the last five years, letting per capita income fall so sharply that the country now qualifies for the “club of poor countries,” that is, EU member states that qualify for cohesion funds.
The numbers came from an in-depth study published at the end of January by the Juan de Mariana Institute.
Between the years 2019 and 2023, the period in which Pedro Sánchez has served as the country’s prime minister, per capita income in terms of purchasing power has fallen by 5.5%,
That ranks Spain as the EU country with the second-sharpest decline in the time period and contrasts with an increase in per capita income in 18 of the 27 member states, including its neighbor Portugal, where per capita income has increased by 1.3% in recent years. Interestingly, Germany came out even worse than Spain in per capita income loss, while France did only slightly better. The institute based its study on data from Eurostat. According to El Debate’s report on the study, the average salary in Spain in the last two years has effectively lost 615 euros in purchasing power.
The numbers show that Spain is falling further and further behind the EU’s average per capita income.
“During Sánchez’s mandate, this ratio has gone from reaching 91% of the European Union average to 86%,” the study states. “It puts us back in the club of the poor countries of the Union, which have the right to request access to the cohesion funds offered by the community institutions, something that had not happened even in the worst moments of the previous financial crisis.”
The study also notes that it puts the government in an uncomfortable situation. If it asks for the cohesion funds, it will be admitting the real problems with the Spanish economy. But if it does not ask for the funds it will be “leaving money on the table to which all Spaniards are entitled according to the criteria set by Brussels.”
The study also found the Spaniards face an increasing tax burden, a situation that again contrasts with most of the EU member states. Fiscal pressure from the government on citizens rose by 2.9 points between the end of 2018 and 2022, going from 35.4% to 38.3% of GDP. This is the second-highest such increase among member states in the period analyzed. Spain is one of the outlier countries where, in an economic crunch caused by the COVID-19 pandemic, inflation, and the war in Ukraine, it insists on collecting more from citizens who are already suffering from higher costs of living and economic stagnation. The institute also observes that while the government insists on blaming the loss of purchasing power solely on forces outside its own policies, the reality is that the government itself is part of the problem.
“The government of Pedro Sánchez has insisted on linking this trend with external factors such as the COVID-19 crisis, the Russian invasion of Ukraine, the rise in international energy prices, etc. However, half of European countries have reduced the fiscal pressure compared to 2018 to leave more resources for families and companies and thereby contribute to generating more growth and more employment in an international context considered adverse,” the study states.
It further observes, “the statement made by the Government that tax collection has increased because of economic growth and job creation is also unfounded since in the last 5 years tax collection has increased 7.5 times more than the Spanish economy has grown and 3 times more than employment,” the Institute indicates.
On average in the EU, fiscal pressure on citizens has either remained the same or decreased, In Nordic economies, for example, the Danish government lowered tax pressure by 2.7 points and the Swedish government by 2.1 points. In Finland, the increase was a mere 0.6 points, far below that of Spain.
The study also looked at the ranking of Spain according to the Economic Management Indicator (EMI), which evaluates how the twenty-seven EU countries have managed their economies in this period of time using a combination of factors from employment to per capita income, fiscal pressure, GDP growth, and public debt.
GDP growth between 2019 and 2023 timidly increased by 2.3 points, placing Spain at number 22 among EU countries and more than 50% behind the European average, which was 5.6%. Spain’s neighbor Portugal grew 7.8% in that same time frame.
The study also found that the government has been fudging employment statistics by including people on so-called “fijo discontinuo” contracts. These contracts are permanent, but employees only work for the company for part of the year. The rest of the time, they either do not work or work elsewhere. Under the government figures, those not working during the ‘downtime’ moments of their contract do not count in unemployment numbers. This contrasts with seasonal workers, who do count as unemployed between stints of work. Under the new calculation, the government boasted that the unemployment rate had fallen 16.7%.
“However, 90% of the reduction is explained by the statistical make-up of fijos discontinuos. If we measure effective unemployment and consider the situation of those 700,000 workers [on fijo discontinuo contracts] who are not employed but have been deleted from the official figure, we find that the drop in unemployment between 2019 and 2023 has been just 1.4%,” the study points out.
According to the institute then, Spain ranks 18th among EU states in terms of unemployment.
At the same time, public debt has sharply increased.
“Its weight on GDP has risen moderately in the EU-27, with an increase of 3.3 points between 2019 and 2023. On the other hand, in Spain a rise of 10.8 points has been observed, which triples the community average,” the study states.
For every euro of GDP improvement during Sánchez’s mandate, the government has also created 2 euros of public debt.
