It could just start with “Sale” signs at your favorite stores. Unfortunately, Spain is getting a glimpse…

• Several European nations – most notably Spain – are facing deflation in the wake of the global financial crisis.
• As consumer demand continues to drop, Spanish merchants are cutting prices, salaries, and employees just to keep afloat.
• Because Spain’s currency (the Euro) is now governed by the European Union, there is very little the Spanish government can do to control potential deflation (such as slash interest rates or devalue the national currency).

Facts & Figures

• Spain’s unemployment rate is currently 15.5% and could reach 20% in the near future. Among workers under 25, the rate rises to 31.8%.  In comparison, the unemployment rate in the US is under 9%.
• La Casa de la Caridad (Valencia’s main soup kitchen) expects to serve 12,000 meals to needy residents in April – three times as many as last year.
• Since last year, wholesale prices in Japan dropped 2.2% and 8% in Germany; in the U.S., the Consumer Price Index dropped for the first time since 1955.

Best Quote

“Alarm bells are going off.  Economies can recover from deceleration, but it’s harder to recover from a deflationary situation. This could be a catastrophe for the Spanish economy.” – Lorenzo Amor, President of the Association of Autonomous Workers

Tags: consumer price index, deflation, euro, European Union, recession, Spain, unemployment