As Spain’s recession deepens, more workers like Juan are being shunted into an underground economy that amounts to as much as a fifth of Spain’s gross domestic product, according to some estimates, with broad implications as the country tries to revive itself, reform its labor market and keep at bay the kind of wrenching crisis that now threatens to push Greece out of the euro zone.
The happy news is that the size of the underground economy means that more Spaniards are working than it might seem, and that the official unemployment figure of 24.4 percent ”” the highest in Europe ”” may be overstated by as much as five to nine percentage points, economists say. That has given the Spanish government an important safety valve.
“Without the underground economy, we would be in a situation of probably violent social unrest,” said Robert Tornabell, a professor and former dean of the Esade business school in Barcelona.
And yet at the same time, a big reason why Greece is up the creek without a paddle is because it also has a shadow cash economy in which no one pays taxes that fund the massive government spending Greeks seem to not be able to live without.
So yeah, have fun talking up your ‘safety valve’, Spain…
Fortunately the problem doesn’t exist in more progressive societies like the United States……oh wait, we are trying to imitate Europe – got it backwards