STUDY Social Cohesion and the State in Times of Austerity Country Case Study: Spain ALBERTO DEL POZO SEN AND JOSÉ MOISÉS MARTÍN CARRETERO December 2013  The recent evolution of the Spanish economy has been strongly affected by the austerity policies recommended by the European Commission. The core of this strategy has focused on reducing the deficit and public debt.  The economic crisis has had a devastating impact on employment. In five years, the unemployment rate has risen 17.5 percentage points(from 9.6 per cent to 27.2 per cent, the highest in history). High unemployment has become the major imbalance of the Spanish economy and the main source of social problems.  In the fight against this situation, the Spanish government has opted for internal devaluation, depressing real wages. The aim is to gain competitiveness, increase exports and thereby increase employment.  This strategy has had tremendous adverse consequences for social expenditure. At constant prices, public spending on health care, education and unemployment has declined in the second part of the crisis(since 2010).  The combination of internal devaluation and falling social expenditure has had adverse effects on social cohesion. Disposable income has decreased, poverty and income inequality have risen dramatically and the number of households in economic difficulties has increased. This is affecting the most vulnerable in particular and has created a more fragmented society. * This country case study is written by Alberto del Pozo and José Moisés Martín of Economistas Frente a la Crisis.