Public Sector Shock
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Public Sector Shock

The Impact of Policy Retrenchment in Europe

Edited by Daniel Vaughan-Whitehead

The goal of this volume is to study this ‘public sector shock’. While budgetary reforms seek to ensure a more balanced and sound economic policy, they may generate new work inequalities among public sector employees, most particularly among women, who account for a considerable proportion of public sector employment. Cuts in education and training may also have an impact on the quality of human capital in both the public and private sectors, despite the fact that the recent crisis has shown the value of education as employees with better skills and training are more likely to maintain their jobs and incomes.
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Chapter 13: Those were the days, my friend: The public sector and the economic crisis in Spain

Rafael Muñoz de Bustillo and José-Ignacio Antón

Extract

After more than a decade leading employment creation in the European Union (EU), in 2008 Spain was hit by the international financial crisis, which quickly turned into a severe economic recession. The advent of the international turbulence added to the bursting of the housing bubble and the end of easy and cheap credit in an economy with a large current account deficit. The consequences have been devastating: GDP experienced a fall of 4 per cent from 2008 to 2010, employment declined by more than 10 per cent and, in the context of a growing labour force, unemployment climbed from barely 8 per cent in 2007 to 22 per cent by the end of 2011. After some initial countercyclical measures in line with Keynesian prescriptions, in the middle of 2010 the Spanish government changed the course of its economic policy and embarked on a process of fiscal consolidation, a move partly associated with pressures from the European Central Bank and the ‘international financial markets’.

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