Spain's high unemployment is the biggest problem facing the country, according to prime minister Mariano Rajoy. In an interview with the Financial Times, he explained that job losses have caused many of the nation's problems, but labour reforms have the potential to ease the situation. Legislation pushed through by his government last year has made it easier for businesses to depart from region-wide collective wage agreements. This means flexible deals at factory level are possible, enabling companies to create the opportunities that allow them to expand workforces.

Labour market reforms also make it easier to sack workers on fixed contracts, which is thought to give employers the confidence they need to begin hiring. With Spanish borrowing costs falling for the first time since March, Mr Rajoy's policies are arguably on the right track. Standing below five per cent, borrowing costs plummeted after Madrid successfully launched a €71 billion (£58.8 billion) funding programme and the country sold €5.82 billion (£4.82 billion) of debt, which is higher than the original target of €5 billion (£4.1 billion).

However, further action is arguably needed to stem the tide of job losses and give the economy a boost. Addressing unemployment is also vital to solving the country's real estate crisis. Spanish property is in surplus and while overseas demand remains high, it cannot make a significant dent in the country's housing stock single handed. With domestic demand perennially low since the onset of the financial crisis, reversing the trend for unemployment will be key in ensuring citizens have the money needed to invest in real estate once again.

Nevertheless, Mr Rajoy is confident that the job market will once again pick up pace, telling the Financial Times: "Recent job losses have taken place in the real estate sector, in the financial sector and in the public sector, but in other sectors of the economy jobs have not been lost. So the labour reform has started to bear fruit." As for the constant criticism levelled at Mr Rajoy for his management of the crisis, the prime minister states that it is "pointless" to look back at his mistakes.



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