Business, Finance & Economics

Spain trying to combat joblessness by promoting entrepreneurship

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Young Spanish entrepreneur Francesc Sanz at work in his downtown Barcelona office. His start-up, LaComunity.com, matches renters with apartment owners online, saving people on commissions. Sanz is part of what Spain's government hopes is a nascent tr

Spain’s unemployment jumped to a record high this April, of 27.2 percent.

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For under-25-year-olds the rate is a whopping 57 percent.

The government of Spain is trying to find ways to get young people back to work. One is by promoting entrepreneurship. That is, start-up companies. But there are hurdles. Red tape, high taxes, even cultural resistance.

Francesc Sanz is an exception. He has one of those coffee mugs on his desk with a slogan on it. It reads, “Keep calm, and write the future.”

Calm, because Sanz is trying to grow a new business during a brutal economic crisis. The future refers to the Spanish home rental market. Sanz, a baby-faced 33-year-old with unkempt hair, owns and runs a start-up that lets you rent apartments online, cutting out the old-fashioned agency middleman.

It’s called LaComunity.

In an interview in his small office in downtown Barcelona, he said getting LaComunity off the ground has been a roller coaster ride.

“It’s never really easy,” he said. “For example I took a credit from the bank at really high interest. I’m still paying for that.”

A big part of that loan didn’t go into growing the business, but to covering taxes. As an independent worker Sanz has to pay a $400 per month healthcare tax. And each of his four employees costs him another 45 percent above and beyond their salaries.

Hardly a way to encourage entrepreneurship, he said.

“I think this is one of most important points for entrepreneurs,” he said. “Cutting all the taxes for hiring people. There are a lot of people looking for a job, and small companies could hire more people.”

When asked if he’d hired more if taxes were less, he was unequivocal.

“Yes, absolutely."

Getting more young people hired is at the heart of a new government stimulus plan designed to reverse Spain’s chronic recession. The government recently outlined a battery of initiatives to make launching a start-up easier. They include millions of euros in funding, tax breaks and other measures.

But Albert Fernandez, a professor at Barcelona’s IESE business school, says on paper they all sound great. And last year they sounded great too.

“They are talking, for example, about paying less taxes, less expenses for hiring employees,” he said. “The problem is that all these measures are taking longer than expected in being implemented.”

As the Spanish economy shrinks, it's harder for the government to spend money to spur growth.

But Fernandez said it’s a little too easy to blame the state for Spain’s lack of entrepreneurs. He said Spain has two big problems. One is Spaniards low level of English proficiency. The second, he said, is a cultural barrier.

“For example,” he said. “I have been in Israel several times. People there are thinking, to create a company is possible — just after finishing university.”

The same holds true in Germany, at least in big cities like Berlin. Unlike Spain, where university graduates aspire to work in big firms, Germans have more of a culture of entrepreneurship.

Take Ingo Schumann and Gretta Gessenberg. When they finished school they launched a high-tech start-up together — and failed. Schumann said in Germany that’s OK.

“You start, make mistakes, you start again and learn,” he said. “This is new from 10 years ago where you’d have to win on your first trial.”

Schumann and Gessenberg’s latest venture, with generous support from their government: An app that tells you where you can charge your phone, computer or even your electric bike battery, at free secure charging sites around the city.

No doubt Germany would love to see Spaniards embrace such spirit. Germany has already spent tens of billions of euros rescuing its southern European neighbors from bankruptcy.

One positive sign out of Madrid. The government says the number of independent businesses with at least one employee — that is, start-ups, roughly speaking — jumped 6 percent last year.