Finance and Economic

Greece is still hopeful that it will be able to reach a deal with private bondholders to cut its massive debt _ despite tougher terms set by its European partners.

On the front line of Europe’s sovereign debt crisis, Athens is trying to get its private creditors _ banks and other investment firms _ to swap their Greek government bonds for new ones with half their face value, thereby slicing some euro100 billion ($130 billion) off its debt. The new bonds would also push the repayment deadlines 20 to 30 years into the future.

However, the main stumbling block over the past few weeks to securing this deal has been the interest rate these new bonds would carry. A high interest rate could buffer losses for investors, but would also require the eurozone and the International Monetary Fund to put up more than the euro130 billion in rescue loans they promised in late October.

In the early hours of Tuesday, politicians representing the 17 countries that use the euro as their currency drew a firm line on the Greek debt restructuring.

Jean-Claude Juncker, the Luxembourg prime minister who chaired a meeting of finance ministers on efforts to fight the crisis, said the average interest rate over the lifetime of the new Greek bonds must “clearly below 4 percent,” with an average rate of less than 3.5 percent for the period until 2020 _ far below the 4 percent demanded by the Institute of International Finance, which has been leading the negotiations for the private bondholders.

The caps on the interest rates underline that the eurozone and the IMF are unwilling to increase new rescue loans above the promised euro130 billion, even though Greece’s economic situation has deteriorated. After already granting Greece a euro110 billion bailout in May 2010, the eurozone and the IMF are threatening to withhold further funding for the country, which has repeatedly failed to hit budget and reform targets required in return for the financial aid.

The interest rate caps will also seriously test the willingness of private bondholders to agree to a debt deal voluntarily. IIF head Charles Dallara over the weekend had characterized the bondholders’ most recent offer as the best possible.

Greek finance minister Evangelos Venizelos was nevertheless confident that the two sides could find common ground.

“We have the green light from the Eurogroup to close the deal with the private sector in the next few days,” Venizelos said in Brussels.

The alternative to a voluntary deal would be to force losses on to investors _ a move that the eurozone has so far been unwilling to make. Officials fear that a forced default could trigger panic on financial markets and hurt bigger countries like Italy, Spain or even France.

Dutch Finance Minister Jan Kees de Jager has said that a voluntary deal was not a must and that getting Greece’s debt down to a sustainable level was a bigger priority.

“Greece and the banks have to do more in order to reach a sustainable debt level,” he told reporters Tuesday as he arrived for a second day of meetings with his European counterparts. “We have to await the discussions about that because a sustainable debt level is absolutely a precondition for the next (rescue) program.”

Europe’s finance ministers are meeting in Brussels to discuss other elements of their efforts to fight the wider crisis _ including a permanent bailout fund for nations in financial distress and a balanced budget treaty.

Greek stocks opened lower Tuesday, shedding a collective 3 percent one day after optimism on the debt writedown deal sparked a 5 percent rally.

Meanwhile, updated budget execution figures released by the Greek Finance Ministry showed that despite massive spending cuts, the country’s fiscal deficit for 2011 was actually higher than in 2010.

Last year’s fiscal deficit hit euro21.72 billion ($28.27 billion) _ euro270 million ($350 million) more than in 2010.

Revenues were euro910 million ($1.18 billion) below target, but the ministry said this was offset by higher-than-anticipated spending cuts of euro896 million ($1.16 billion).

These figures are on a cash basis, and exclude some categories of spending taken into account in calculating the final budget deficit for 2011 _ which Greece has pledged to cut to about euro20 billion ($26 billion).

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Nicolas Paphitis in Athens, Greece, contributed to this story.

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After four leaderless months, Yahoo named Scott Thompson as its new CEO on Wednesday — choosing an outsider to take over the helm despite shareholders’ calls to sell the company.

Thompson was previously the president of PayPal, an eBay (, Fortune 500) subsidiary. His appointment, which becomes official January 9, follows the ouster of former CEO Carol Bartz — who was unceremoniously fired by the company’s board via phone in September.

Shares of Yahoo (, Fortune 500) closed 3.1% lower Wednesday.

In a prepared statement, Thompson called Yahoo "an industry icon" with a "rich history." Although that’s true, Yahoo has struggled mightily in recent years. The company gave up on search two years ago, a market that it once led. It is also losing ground with its other cash cow, display advertising, to new entrants to the market such as Google (, Fortune 500) and Facebook.

On a conference call following the announcement, journalists and analysts hammered Thompson on those points. He said he needs time on the job to develop strong answers.

"It’s too early for me to have any informed opinion as to the display space, what’s going on there and what’s happening next," Thompson said on the call. "I have a lot to learn, and it’s still very early days … but down in that data we’re going to find ways to innovate and compete."

Roy Bostock, chairman of Yahoo’s board of directors, was also on the call and jumped in to answer many of the hardball questions.

"What we’re doing at Yahoo, you can call it a turnaround, but it’s really building on strong assets," Bostock said.

Will Yahoo sell itself? Despite Bostock’s insistence Yahoo can stand alone, the company’s weakness has attracted buyout interest from a long list of both private equity firms and tech titans. Reports in late October said Google was preparing a bid, in addition to Microsoft (, Fortune 500), which offered to buy Yahoo for more than $47 billion in 2008 and was turned down no checking account payday advance. Reports last month said Chinese Internet company Alibaba, of which Yahoo owns a stake, is preparing a takeover bid.

Yahoo co-founder Jerry Yang and other board members have privately told four major private equity firms that the board would not support a takeover offer for the entire company, Fortune reported on Wednesday.

Several groups of activist shareholders had pushed Yahoo’s board to sell the company, but bringing in an outside CEO makes that possibility more remote.

An analyst on the conference call asked Thompson whether he "see[s] Yahoo as public or private" in the future.

Thompson got out half a word before Bostock jumped in: "We are a public company, with roughly a $20 billion market cap. We don’t see that changing right now."

But earlier in the call, Bostock said Yahoo is "considering a wide range of business investments" and other options. He stressed several times during the call that "the primary focus will be on core business."

That leaves Yahoo room to shed more of its vast product portfolio. It began winnowing in late 2010, killing off struggling services like its Buzz community news site and aging AltaVista search engine. Yahoo also thinned its blogs and sold off bookmarking service Delicious.

Thompson said his aim is "to return this business to one of the great iconic brands. I have a core belief that what happens in the next five years, and the next ten, is almost impossible to imagine."

He closed the call by saying, "I’m genuinely excited to be here. I would not be here if I didn’t think the future of this brand could be spectacular."

Yahoo chief financial officer Tim Morse had been serving as interim CEO, and he will return to his former position once Thompson takes the helm. Morse will also join the company’s board. 

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Construction spending jumped in November as builders spent more on single-family homes, apartments and remodeling projects.

The Commerce Department said Tuesday that spending on construction projects rose 1.2 percent in November, following a revised 0.2 percent drop in October. The increase was the third in four months and the largest since a 2.2 percent rise in August.

The November increase pushed spending to a seasonally adjusted annual rate of $807.1 billion, still barely half the $1.5 trillion that economists consider healthy. Analysts say it could be four years before construction returns to health levels.

Home construction has begun a gradual rebound and likely added to the nation’s economic growth in 2011. The chief reason is apartments are being built almost twice as fast as two years ago. Renting is the only option for many people who have lost their jobs, their homes or both.

For November, private residential construction increased 2 percent in November to a seasonally adjusted $522.3 billion. It was the fifth consecutive gain.

Single-family construction rose 1.5 percent while multi-family construction including apartments rose 1.3 percent. The category that covers home remodeling rose 9.5 percent.

Nonresidential construction was unchanged at an annual rate of $243.7 billion, Spending on hotels and hospitals rose but those gains were offset by weakness in other areas. Spending on office buildings dropped 1.3 percent and the category that includes shopping centers fell 0.8 percent.

Spending on government projects rose 1.7 percent to an annual rate of $284.9 billion. That followed a 1.8 percent drop in October. State and local construction gained 1.3 percent and federal building activity increased 5.3 percent. But even with those gains, activity in the government sector was down 5.3 percent from a year ago.

The construction industry was hit hard by the housing bust and has had trouble recovering since the recession ended more than two years ago.

Severe budget problems have squeezed state and local governments while the federal government has come under pressure to get control of soaring budget deficits.

Private builders haven’t fared much better. While their spending increased, they have scaled back on construction plans and are working from depressed levels.

Builders in November broke ground on homes at a seasonally adjusted annual rate of 685,000. That was a 9.3 percent jump from October and the fastest pace since April 2010.

Builders should start at least 600,000 homes this year. That’s up from 587,000 last year and 554,000 in 2009 _ the worst year on record. Still, that’s half the number that economists expect in a healthy market.

While construction may be turning around, home sales are still weak. This year will likely end up as the worst for new-home sales in history.

While new homes represent less than one-fifth the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

Builders are struggling to compete with weak demand because of still-high unemployment and a glut of homes on the market because of foreclosures and short sales _ where lenders accept less for a house than the mortgage on the home is worth. Those homes are selling for at an average discount of 20 percent, which is lowering neighboring home values.

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The U.S. Treasury again shied away from labeling China a currency manipulator on Tuesday, but it rapped the country for not moving quickly enough on exchange rate reforms.

Some U.S. politicians have argued that China has gained an unfair competitive edge in global markets by keeping the yuan artificially low to boost exports, and pressure has mounted in Congress for President Barack Obama to punish China.

But the administration prefers to tread softly and use diplomacy to effect change. The U.S. Treasury, in a semi-annual report, as usual said that statutes covering a designation of currency manipulator “have not been met with respect to China.”

It repeated its standard line that appreciation in the yuan has been too slow, calling it “insufficient.”

“Treasury will closely monitor the pace of appreciation and press for policy changes that yield greater exchange rate flexibility, a level playing field, and a sustained shift to domestic demand-led growth,” it said in the report to Congress on international economic and exchange rate policies.

The value of the yuan, which Beijing manages closely, has risen 4 percent against the dollar this year and 7.7 percent since China dropped a firm peg against the greenback in June 2010. The Peterson Institute for International Economics recently estimated the yuan was undervalued by 24 percent against the dollar, down from 28 percent earlier in the year. It attributed the change to both Beijing’s policy of gradual currency appreciation and higher Chinese inflation.

At the heart of the friction between the two countries is a U.S. trade deficit with China that swelled in 2010 to a record $273.1 billion from about $226.9 billion in 2009. The cumulative Jan-Oct deficit with China is on track to top that this year, running at around $245.5 billion.

The Senate this year for the first time passed a bill that would require the administration to slap penalties on Chinese imports if it fails to adopt market-based exchange rates. While the measure has made no progress in the lower chamber and is unlikely to become law, it shows the mounting U.S. frustration with its vital trade partner.

President Obama at the November APEC meetings, in his toughest words yet, told President Hu Jintao that China must play by global trade rules and act like “a grown-up.”

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But U.S. Treasury Secretary Timothy Geithner has said the law on the FX report, which requires the administration to determine whether U.S. trade partners are deliberately undervaluing their currencies, is a poor tool to push Beijing on the yuan.

Instead, the United States prefers to argue for change at its regular closed-door meetings with Chinese officials. It also uses international economic forums, such as the Group of 20 leading nations and the International Monetary Fund, to ramp up public pressure on Beijing to move more quickly to a more-flexible currency.

China is the biggest foreign holder of U.S. Treasuries, with about $1.1 trillion, a position that gives it leverage in international economic negotiations. Foreign exchange traders had not expected a change of U.S. tactics.

“It’s not very surprising. It’s sort of sliding it in under the radar. They’re (Treasury) really not in a position to make any major moves at this point,” said Sean Incremona, an economist at 4Cast in New York.

The Treasury Department has not labeled a country a currency manipulator since July 1994, when it cited China. A designation would require the United States to step up negotiations with Beijing on the yuan’s value.

The yuan slipped on Tuesday as strong dollar demand from corporations offset a record high mid-point fixed by the People’s Bank of China. The central bank set an all-time high dollar/yuan mid-point in an apparent move to let the yuan rise a little more at the end of 2011 so as to make the yuan’s full-year nominal appreciation look bigger, traders said.

Some U.S. manufacturers, which have been hit hardest by competition from China and other emerging economies, would still prefer the U.S. government to take a harder line.

“China’s currency is still enormously undervalued,” said Scott Paul, executive director of the Alliance for American Manufacturing, an industry lobby for hard-hit textile, steel and labor groups.

“I’m disappointed that President Obama has now formally refused six times to cite China for its currency manipulation, a practice which has contributed to the loss of hundreds of thousands of American manufacturing jobs.”

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Racing the debt clock, Congress is working on dual tracks while President Barack Obama appeals to the public in hopes of influencing a deal that talks have failed to produce so far.

“We have to ask everyone to play their part because we are all part of the same country,” Obama said Saturday, pushing a combination of spending cuts and tax increases that has met stiff resistance from Republicans. “We are all in this together.”

In his weekly radio and Internet address, Obama said the wealthiest must “pay their fair share.” He invoked budget deals negotiated by GOP President Ronald Reagan and Democratic House Speaker Tip O’Neill, and Democratic President Bill Clinton and Republican Speaker Newt Gingrich.

“You sent us to Washington to do the tough things, the right things,” he said. “Not just for some of us, but for all of us.”

As a critical Aug. 2 deadline approached, the chances that Obama would get $4 trillion or even $2 trillion in deficit reduction on terms he preferred were quickly fading as Congress moved to take control of the debate.

House Republicans prepared to vote this coming week on allowing an increase in the government’s borrowing limit through 2012 as long as Congress approved a balanced-budget constitutional amendment, which is highly unlikely.

In the Senate, the Republican and Democratic leaders worked on a bipartisan plan that would allow Obama to raise the debt limit without a prior vote by lawmakers. The talks focused on how to address long-term deficit reduction in the proposal in hopes of satisfying House Republicans.

In the Republicans’ address Saturday, Sen. Orrin Hatch of Utah argued for passage of a balanced-budget amendment. He blamed Democrats for failing to embrace adequate budget cuts and said “the solution to a spending crisis is not tax increases.”

An amendment that requires a balanced budget, he said, “would put us on a path to fiscal health and would prevent this White House or any future White House from forcing more debt on the American people faxless cash advance.”

The government said Friday it was using its last stopgap measure to avoid exceeding the current $14.3 trillion debt limit. Administration officials, economists and the financial markets have warned that missing the Aug. 2 deadline and precipitating a government default would send convulsions through an already weakened economy.

In a news conference Friday, the president argued that he had the public on his side as in calling for a large deficit reduction package that included spending cuts and increased tax revenues. But Republicans have flatly rejected any proposal from Obama that contains additional revenue from closing tax loopholes, restricting the value of deductions for the rich, increasing tax rates for hedge fund managers or ending oil and gas subsidies.

“This is not a matter of the American people knowing what the right thing to do is,” Obama said. “It’s a matter of Congress doing the right thing and reflecting the will of the American people.”

Obama had held five straight days of meeting with congressional leaders at the White House, but none of the three options he proposed _ deficit cuts of $4 trillion, $2 trillion or $1.5 trillion over 10 years _ were unlocking enough support to increase the debt ceiling by the $2.4 trillion Obama wants to make it last beyond the 2012 elections.

Essentially declaring those discussions over, Senate Republican leader Mitch McConnell said Friday: “”Now the debate will move from a room in the White House to the House and Senate floors.”

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French Finance Minister Christine Lagarde is expected to be chosen as early as Tuesday to be the new leader of the International Monetary Fund.

Lagarde would be the first woman to lead the lending organization. She would replace Dominique Strauss-Kahn, who resigned last month after being charged with sexually assaulting a New York City hotel housekeeper. Lagarde was opposed by Agustin Carstens, a Mexican central banker whose candidacy never caught fire, even among developing countries.

Lagarde has broad support in Europe payday loans guaranteed no fax. And a high-ranking Chinese official said Monday that Beijing supports Lagarde, according to several reports.

U.S. officials haven’t publicly backed any candidate. But most analysts expect the Obama administration to support Lagarde. Combined, the United States, Europe and China hold a majority of votes on the IMF’s board.

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ATHENS, GREECE

The ash cloud from a Chilean volcano that has been erupting for nearly two weeks has circled the globe and come home again.

The returning cloud _ which has disrupted flights in Argentina, Brazil, Uruguay, Australia and New Zealand on its around-the-world trip _ on Friday forced Chilean officials to cancel domestic flights for the first time since the Cordon Caulle volcano began erupting June 4.

LAN airlines suspended flights to the cities of Puerto Montt, Coyhaique and Punta Arenas in the far south of the South American country. While ash from Cordon Caulle has wreaked havoc with air travel abroad, it had left Chile’s internal flights largely untouched until Friday.

“The tip of the cloud that has traveled around the world is more or less in front of Coyhaique,” said Civil Aviation Office chief Pablo Ortega. Coyhaique is 800 kilometers (500 miles) south of the volcano.

Chilean authorities evacuated 3,500 people living near the volcano after it began erupting but some have since returned.

The governor of Ranco province, Eduardo Holck, said the volcano is emitting a fine ash that is scattering over the Nilahue river valley.

The government, however, maintained a red alert for communities near Cordon Caulle. Chile’s National Geology and Mines Service warned that volcanic activity could begin again “with episodes similar or greater in intensity that was has occurred.”

On Thursday, the government of the Argentine province of Neuquen declared an economic emergency to aid towns where falling ash from Chile’s volcano is endangering livestock and keeping tourists away.

The decree by Gov. Jorge Sapag will mean that those affected can receive tax benefits, among other measures.

The ash has blanketed towns across the border in Argentina.

In the area of Villa La Angostura up to one foot (30 centimeters) of ash has accumulated on the ground. The eruption came just as resorts in the mountain towns were preparing for ski season.

Argentina’s regional airports in Patagonia have also been shut down for more than a week due to the cloud of fine grit, which can damage airplane engines.

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Wal-Mart Stores Inc. unveiled a $15 billion share buyback program Friday as it sought to reassure shareholders at its annual meeting that the world’s largest retailer is still growing.

The buyback will replace a previous $15 billion repurchase plan begun a year ago. The company bought back 244 million shares worth $12.9 billion under that program.

“This reflects the strong financial performance of your corporation,” said Charles Holley, Wal-Mart’s executive vice prsident and chief financial officer in an address to shareholders and associates packed in a University of Arkansa arena about 30 miles from its Bentonville headquarters.

The news comes after the company increased in March its dividend in its current 2012 fiscal year from $1.21 to $1.46 per share, an increase of 21 percent that returned $1.3 billion to shareholders.

The shareholders’ meeting maintained the tradition of being part pep rally, part business, with actor Will Smith serving as master of ceremonies. The 2011 “American Idol” winner, Scotty McCreary, also appeared.

About 16,000 people packed the arena, including Wal-Mart employees from 15 countries.

“You are legendary for your rowdiness,” Smith bellowed in warming up the crowd.

In Wal-Mart’s business, international sales are sizzling, but the company is still trying to reverse a two-year sales slump at home, with no clear sign of when that will happen.

“We made a lot of progress over the last 11 months,” said Bill Simon, president and CEO of Wal-Mart’s U.S. business in an address to shareholders. “We have the right plan.”

He noted that two-thirds of the business has seen gains in a key measure of sales, most of which is coming from groceries.

But he cautioned, “You certainly can’t predict the weather and the economy.”

Wal-Mart’s flagship business is hurting because it’s still smarting from the mistakes it made on pricing and selection more than two years ago. The company has been racing to restock thousands of items it culled as part of its overzealous bid to clean up its stores two years ago. It’s also gone back to its “Everyday Low Price” roots.

Wal-Mart is also battling increasing threats from competitors, particularly online rivals like Amazon.com and dollar chains, which have expanded their assortments and become more competitive on price.

Wal-Mart’s low-income shoppers have also seen their financial problems shift. A year ago, they were worried about losing their jobs. Now, rising gas prices and other household costs are squeezing their budgets and making it tough to stretch their remaining dollars to the next payday.

Thursday’s reports on May sales from major retailers, including rival Target Corp., provided more evidence that inflationary pressures are causing shoppers to pull back on discretionary items like clothing and home goods.

On Thursday, Simon told a media gathering that low-income shoppers are going through a “prolonged malaise.” Such financial woes could stall Wal-Mart’s campaign to turn its U.S. business around.

Wal-Mart’s fears have deep repercussions, because it’s a bellwether of consumer spending and accounts for nearly 10 percent of all nonautomotive retail dollars spent in the U.S.

Shares of Wal-Mart have tracked closer to its profits than its domestic sales this past year, and its robust international business, fueled by Mexico, China and Chile, has propped up revenue and profits. Wal-Mart shares are up almost 4 percent over the past 12 months. But they peaked in late January and have lost almost 7 percent since the company said it would not predict when U.S. revenue at stores open at least a year will begin growing, after setting a target date for last holiday season and missing it. That revenue measure has had eight straight quarters of declines.

Walmart stores account for 62 percent of the company’s revenue, which reached $418 billion in its latest fiscal year ended Jan. 31; international makes up 26 percent.

Walmart’s CEO of the company’s international division attributes its success to focusing on what shoppers want.

“It’s about finding the right item,” said Doug McMillon.

McMillon noted that the company’s fastest-growing division is working to expand its international Internet shopping business and is also growing through acquisitions.

The company is preparing to close on a $2.4 billion purchase of a majority interest in South African retailer Massmart, which operates in 14 countries.

The company’s overall revenue is also getting a lift from its improving Sam’s Club division, which has enjoyed five straight quarters of improving gains in stores open at least a year. Sam’s Club has benefited from better quality merchandise, from higher grade sirloin steak to trendier fashion labels.

To address the increasing threat of dollar stores, Wal-Mart is also opening its first of up to 20 Walmart Express stores planned for this year. These stores are about the size of a typical drugstore.

Many analysts are eager for Wal-Mart to ramp up the expansion of these small stores. Rivals like Dollar General and others have been blanketing areas around the country with their own stores.

Simon told shareholders he’s confident about Wal-Mart’s comeback.

“You better get ready, because we’re coming,” he added.

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The first thing Silvia Huelves was told when she started studying architecture was that she should take up Chinese or Japanese _ she was not going to build anything in Spain any time soon.

It wasn’t criticism of her skills but a reflection on the state of the country, where the jobless rate among 16-24-year-olds is a staggering 45 percent and a construction sector slump caused nearly two years of recession.

Now the young people are protesting, roughing it out in improvised camps in the hearts of Spain’s main cities to bring attention to their plight. While they’re angry about lots of things, bleak job prospects and having to live with Mom and Dad well into adulthood are high on the list.

Huelves, a 19-year-old with a big smile, said her professors make no secret of the dire state of things.

“You go in and the first thing they say is ‘forget about it, you are never going to build buildings,’” she said. “They say architecture is really cool and well-rounded and useful for a lot of things, but you are not going to build buildings.”

Construction is no doubt the hardest hit sector in Spain’s battered economy as it tries to recover from a burst real estate bubble. But in almost any line of work Spain’s young people face a dark outlook. The jobless rate in the under-25 age bracket makes the national unemployment rate of 21.3 percent seem mild by comparison. Widen the bracket to the age of 29 and the rate is still a stunning 35 percent.

To voice their discontent, young people have been coordinating over the past two weeks via social media like Twitter and Facebook to set up huge camps in city centers. The camp in Madrid features makeshift clinics and libraries with grungy sofas as well as stands with donated apples and bananas, juice and baguette sandwiches.

“More than anything, this is about being fed up. We are absolutely fed up,” said Maria Martinez, 32, sitting in a lounge chair under blue sheeting protecting the Madrid camp from a blazing midday sun.

Martinez considers herself relatively lucky because she has been jobless for only about two months and has worked since age 17, mainly in factories and offices. But it was always for low wages, sometimes with no benefits and always getting part of her pay under the table.

Martinez rattled off other gripes _ conservative politicians who watched Spain’s real estate market heat up and took credit as GDP rose nicely, banks that helped and profited by providing streams of easy credit, and the current Socialist government that presided over the bubble’s loud pop in 2008, with its disastrous impact on the country.

“I am the first one to acknowledge we have reacted late and we have been asleep for a long time,” Martinez said.

Another jobless protester, Pablo Luna, 27, has a degree in history, just finished a Masters in journalism and says he has zero prospects for work. He said it is virtually unheard of for people to complete their studies and go right into work in their field.

“Of the people I know, no one has done it,” said Luna, an articulate man with a thick, dark, wild pony tail and the rich voice of a radio announcer. “I should be out looking for a job. But my heart tells me I should be here now.”

Much of the problem lies with rigid rules governing Spain’s labor market, in particular the high cost of laying off established, older and less productive workers under legislation that goes back 30 years, said Gayle Allard, a labor market expert at IE Business School in Madrid.

With employers wary of giving new hires open-ended contracts with full benefits, younger workers often end up with temporary ones, sometimes lasting just a few months. In the good days, companies would roll those contracts over, but since recession hit many have just let them run out.

This makes the Spanish jobless rate highly vulnerable to swings in the economy, as nearly a third of all workers have temporary contracts. The jobless rate has more than doubled in about three years, with young people who often earn just euro1,000 ($1,400) a month taking a particularly hard hit.

In the 27 countries of the European Union, as of March of this year the jobless rate for under-25’s averaged about 21 percent, less than half of Spain’s, according to the statistical agency Eurostat. Even the rate in bailed-out Greece is lower, at 36 percent.

Last year the Spanish government passed labor market reforms designed to make it cheaper and easier for businesses to lay off workers and more expensive to use temporary contracts. The idea was to encourage hiring and make employment more stable.

But Allard says the changes are timid and that today’s young Spaniards _ even with foreign language and computer skills _ are still effectively shut out of the labor market.

The effects go beyond protests and rallies to shape the structure of the country’s society.

Spain has one of Europe’s lowest birth rates _ 1.4 children per woman of childbearing age _ in part because it takes so long for young people to get out of their parents’ house, establish a career and start families.

Until that happens, life for many young Spaniards is a sort of limbo.

“They cannot become productive. They cannot use their skills. They cannot save. They cannot invest in housing. They are not accumulating wealth that they can leave off in the future,” said Allard, an American who has lived in Spain for 25 years.

“These kids are paying our pensions and they are not going to have been able to save anything. It is really scary,” Allard said.

Arcadi Oliveres, an applied economist at Autonomous University in Barcelona, said that compared with other European countries Spain offers comparatively little vocational training as an early alternative to going to jam-packed universities.

The result is that Spain churns out legions of university-trained scientists _ who end up unemployed and eventually work in vocational jobs anyway, Oliveres said.

“Unlike a structure that is pyramid-shaped in other countries, here there is a real inflation of university graduates,” Oliveres said. “As a labor market model it is a bit anomalous.”

At the medical school in Madrid Complutense University, 21-year-old Maria Perez is two weeks away from graduating with a degree in podology and she is far from thrilled. Of her immediate circle of 20 friends and close acquaintances, she says three have jobs.

“There is not a lot of reason to celebrate because you know you are going to keep living with your parents and end up working in a grocery store,” she said.

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