The sun is still shining but many on the Canary Islands see only dark skies ahead. About 27 per cent of the Canarian workforce is unemployed

For a visitor admiring the Atlantic billows from a seafront promenade in Las Palmas, it is hard to believe that the so-called “Fortunate Isles” are in the grip of economic crisis. The sun still shines, the palm trees sway and the sea is blue.

Yet the Canary Islands, the Spanish subtropical archipelago whose exports of bananas and tomatoes gave the name to London’s Canary Wharf, exemplify the fragility of Europe’s peripheral economies after nearly two years of slowdown and recession.

Unemployment, in particular, has reached a level that would be regarded as catastrophic in other European Union countries: 27 per cent of the Canarian workforce is without a job, and the figure is nearly 50 per cent for those under 25.

Carmen Ramírez, a cheerful, 46-year-old secretary, lost her job in November when the property developer that employed her could not sell its holiday apartments.

Having worked for more than a decade, Ms Ramírez is eligible for a generous pay-off and two years of social security benefits. But she is not optimistic as she sips a Pepsi and explains her plight in an open-air hotel bar. “I think the bad year will be 2010,” she says, before adding the afterthought: “And 2011.”

That view is shared by entrepreneurs, bankers and social workers on the island of Gran Canaria, of which Las Palmas is the capital.

“People who no longer needed our help have come back,” says Josefina Martín of the Red Cross, which supports immigrants and other economically vulnerable groups. “We’re getting more Spaniards too. Even members of the Red Cross who gave us money in the past are now coming to us for help.”

Even compared with the rest of Spain, let alone northern Europe, the Canaries were particularly exposed to the cyclical businesses of tourism and construction when the crisis struck.

Eurozone job numbers continue to fall

Employment levels in the eurozone fell to their lowest level in more than three years at the end of 2009 after a sixth consecutive quarter of job destruction, writes Stanley Pignal.

The number of jobs in the single currency area remained lower than before the economic downturn in spite of more people being of working age, according to seasonally adjusted figures from Eurostat, the European Union’s statistics agency. In many countries, the fall in the number of jobs is outstripping a rise in unemployment, suggesting part of the population has dropped out of the potential labour force altogether.

In Spain, for example, 40,000 people were listed as newly unemployed in the three months to December but there were 150,000 fewer jobs in the economy.

Figures for the eurozone show that, in the last six months of 2009, the number of available jobs fell 1.1m, whereas unemployment rose 855,000.

A large part of that difference will consist of people who were no longer listed as unemployed because they were no longer actively looking for work.

“Labour participation rates tend to go down during a recession,” said Paul Swaim, an economist at the Organisation for Economic Co-operation and Development. “People look at the state of the labour market and some decide to return to education, for example. Some people near retirement age decide not to work, though they might have done so if conditions were better.”

The rate of job destruction fell to 0.2 per cent in the fourth quarter from a peak of 0.8 per cent in the first and 0.5 per cent thereafter. The January unemployment rate in the eurozone was 9.9 per cent.

One reason for the high unemployment rate is that migrants from mainland Spain and abroad flocked to the islands to benefit from a building boom fuelled by bank credit and EU funds, pushing the population up by more than a quarter in a decade to more than 2m. Construction has now almost come to a stop.

Business people on the island nevertheless warn visitors against reading too much into the grim statistics. “Look, if unemployment was really at 27 per cent there would be riots in the streets,” says a senior local banker. “And there aren’t.
It’s because of the underground economy.”

A high street branch manager for another bank agrees that the situation is not as dire as the numbers suggest. “The Canaries is a bit like Andalucía [in southern Spain], where unemployment is also high. The climate is one reason. You’re comfortable, and one day just comes after another.”

But the black economy – where people work for cash out of sight of the tax authorities while claiming social security benefits – has been hit almost as hard as the legitimate one. Canarians, furthermore, know their workforce is under-educated and vulnerable to further falls in tourism, especially among the Britons who may be affected by the decline of sterling.

The regional government is doing its best to lure foreign investors to the islands with the help of the archipelago’s special regime of low taxes, and to promote biotechnology and other new industries to reduce dependence on the 10m tourists who visit each year.

To the chagrin of employers, however, jobless Canarians, like other Spaniards, are more likely to covet safe and well rewarded jobs in the civil service than to launch their own businesses or to work in the private sector for lower pay.

Ms Ramírez plans to sit the necessary civil service entrance exam this spring, but says she will be one of 4,000 contestants for only 78 vacancies. When the port in Las Palmas said it was looking for 15 reserve police officers – with no work guaranteed – it received 900 applications.

With small shops closing for lack of custom, property companies defaulting on their debts and the unemployed staring out to sea from benches flanked by empty apartment blocks, there are few optimistic locals in Las Palmas these days.

“Every month we see more clients who have lost their jobs,” says the bank manager, whose doleful manner suggests it will be a long time before he recognises his home as one of the “Fortunate Isles” of legend. “We are not euphoric at the best of times,” he says. “But I think the worst is still to come.”