Can Spain Spend Its Way Back To Economic And ETF Health?

With unemployment skyrocketing and gross domestic product still on the decline, Spain and its related exchange traded fund (ETF) may not be reaping the benefits some other European countries are enjoying.

Spain’s GDP declined 1% from the previous quarter and contracted 4.1% year-over-year, reports Matthew Saltmarsh for The New York Times. The weakness of the economy is mainly attributed to the collapse of a debt-fueled construction boom. According to Eurostat, the unemployment rate was 18.1% as of June.

Prime Minister José Luis Rodríguez Zapatero’s plan is to revitalize Spain is by investing in education, infrastructure, research, biotechnology and renewable energy without reducing workers’ rights and also increasing government unemployment benefits, report Rachel Donadio and Victoria Burnett for The New York Times.

Small- and medium-size businesses, which make up 90% of companies in Spain, are faltering under high social benefit policies the government has imposed. The business sector demanded lowering costs to the social security system and that the cost of firing or laying off workers be reduced, but talks have broken down.

Experts remain incredulous, believing Zapatero’s wishful thinking lacks a laid-out plan for medium-term job creation or means of financing such social policies. Zapatero did mention, however, that he might take on more debt to finance the endeavors.

• iShares MSCI Spain Index (EWP): up 29.8% year-to-date

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