Spain won't recover without encouraging its autonomos

How's this recovery thing working out for you? 2010 is supposed to be the year of recovery and maybe it is taking off in the rest of the world (China's growing too fast I read this week "China's GDP surges 11.9%"). But there's precious little sight of a recovery in Spain. The newspapers are still full of bad news stories, the property market is stalled and shops are still being boarded up. Even the weather, usually a consolation, has been letting us down.

What's stopping things getting back to normal or at least improving? Mostly I suppose it comes down the severity of the downturn that Spain suffered. As in Britain the housing boom and bust left a mountain of mortgages and personal debt as well as businesses used to a level of demand that simply wasn't sustainable. We badly need something to take the place of the housing boom but on a more sustainable basis; new enterprise to fill up the empty shops and premises, provide employment and get demand growing again.

But that needs new businesses starting small and hopefully growing and sparking a recovery. Unfortunately Spain's system of self-employment or "autonomo" is putting off a lot of people from even trying to begin a business and provide themselves (and others) with work.

We get a lot of enquiries from people who have an idea for a business but as soon as they hear what's involved with autonomo they are put off: the high minimum social security costs (you have to pay at least 250€ a month even with zero income), the need to charge VAT (there's no small business exemption) and the quarterly reporting and bureaucracy all put people off. The rules also seem to do everything possible to discourage small businesses - e.g. autonomo's don't get unemployment benefit and have lower tax allowances.

You start to realise why the number of people going autonomo has fallen for 23 months in sucession (see article) and why so many people go into business unofficially i.e. illegally without registering or paying tax. There must be millions of business plans that have been shelved or entered into "negro" (black economy). This is damaging in so many ways: potential business owners stay on the dole, they don't pay taxes on the "lost" business and there is no chance of them employing anyone themselves.

Reform is long overdue but there are a few good things about Autonomo and lots of people are giving it a go. There is even an exemption from those social security charges and some subisidies available. For details see our Autonomo guide.