Spain wins credit upgrade but jobless pain lingers

Standard & Poor's boosted Spain's credit rating on Friday, hailing signs of economic recovery despite massive unemployment in the eurozone's fourth-biggest economy. The agency was the third of the big credit raters to polish Spain's financial outlook after years of turbulence, saying tough but unpopular reforms since 2010 had strengthened it. It hailed "improving economic growth and competitiveness" due to looser hiring-and-firing laws and other structural money-saving measures since 2010. Spain was plunged into a double-dip recession in 2008 when a decade-long property bubble burst, wiping out millions of jobs. It came under pressure to seek a bailout from its European neighbours in 2012. Its credit rating -- a key measure of its ability to repay its debts -- fell close to "junk" status. But S&P on Friday followed the other major ratings agencies Moody's and Fitch in upgrading Spain's sovereign rating, raising its score to 'BBB' from 'BBB-' with a stable outlook. Spain's economy crawled out of a two-year downturn in mid-2013. In the first three months of this year it posted 0.4-percent quarterly growth -- the fastest pace in six years. Spain's conservative government has raised its official economic growth targets to 1.2 percent this year and 1.8 percent for 2015. Standard & Poor's warned Spain's still high household and public debts could slow down the recovery. But it raised its own average annual growth forecast for Spain for the years 2014 to 2016 to 1.6 percent. Investor confidence in Spain has strengthened. Madrid's stock market has perked up and the interest rate on Spain's key 10-year debt has eased to below three percent. - Jobs for the young? - "The upgrade reflects our view of improving economic growth and competitiveness as a result of Spain's structural reform efforts since 2010, including the 2012 labour reforms," Standard and Poor's said in its credit report. "Recent reforms to the retail sector deregulating opening hours, liberalising temporary contracts, and business start-ups also appear to be supporting Spain's economic recovery." The labour reforms made it easier and cheaper to hire and fire workers or change their working conditions. Other structural reforms cut public budgets and spending. Such measures sparked angry street protests. Protesters said they were being made to pay for a financial crisis they blamed on banks and politicians. With Spain's unemployment rate one of the highest in the rich world, the political opposition says ordinary Spaniards are still suffering despite the government's claims of a recovery. The number of registered unemployed in Spain fell from March to April by 112,000 to 4.68 million, a record decline hailed by Prime Minister Mariano Rajoy as a turning point. The overall official unemployment figure is close to six million people. Standard & Poor's forecast that "recovering employment will contribute to improvements" in the country's finances. The government forecasts an unemployment rate of close to 25 percent this year and 23.3 percent next year, only dipping below 20 percent in 2017. The jobless rate is a huge 55.5 percent among the under-25s and many young Spaniards are leaving to look for work abroad. In 2013 nearly one in four unemployed people -- about 1.3 million -- had been jobless for at least three years, the National Statistic Institute says. It also says nearly half a million jobless people in Spain have given up looking for work, citing figures for March. "I am hopeful about the future because I think we have broken a trend of destruction of employment," Rajoy said on May 6. "But we still have a lot to do because there are still many people who have not found work."