Europeans feel the pain from the global economic storm
ZARAGOZA, Spain: Few places in Europe have prospered in recent years like this bustling crossroads city of 700,000, halfway between Barcelona and Madrid.
Factory employees here pulled overtime shifts. Companies hired temporary workers to satisfy growing consumer demand. A half dozen new bridges were built across the Ebro river and office buildings were filled as fast as they could be thrown up.
The capital of Spain's fastest-growing region, inland Zaragoza kept booming even as the overbuilt Mediterranean coast came to symbolize how real estate excess was not just an American ill.
But just as the cold autumn wind is blowing down from the Pyrenees, Zaragoza and the surrounding region of Aragón have suddenly been hit by a sharp economic downturn. And the troubles here make clear that what had been seen as a crisis confined largely to finance and real estate is quickly spreading to more fundamental sectors of the European economy, such as manufacturing.
For the generation of young Spaniards who have known only good economic times the chill is shocking.
"Maybe older people are not surprised but this is totally new for me," said Francisco Braulio, 31, who works for Valeo Termico, a parts makers that supplies the General Motors plant here, the automaker's largest factory in Europe.
Braulio and his wife, recently married, have put off talk of having children for now and to save money they are eating meals and watching movies at home rather than going out.
Zaragoza's fate echoes the pattern now unfolding across Spain and the rest of Europe.
On Monday, the European Commission said the 15-nation eurozone appeared to have entered a recession in the third quarter, and predicted the economy would barely recover next year, growing by just 0.1 percent.
In Madrid, the government announced an economic stimulus program after a report Friday that Spain's gross domestic product fell 0.2 percent this summer, the nation's first quarterly economic contraction in 15 years.
Despite highly publicized interest rate cuts and more than a trillion euros in loan guarantees and capital injections by governments from London to Frankfurt, the situation is expected to only get worse. European consumer confidence plunged in October, hitting its lowest point in 15 years.
"It's come very suddenly," said José Mendizábal, chief executive of Pikolin, Spain's biggest mattress maker and one of the largest private employers in this area. "People are frightened of spending money."
Pikolin has already eliminated temporary positions, bringing its workforce down to 1,200 from 1,400. But the slowdown has intensified in recent weeks, with sales now off 15 percent from a year earlier, and more job cuts are likely if sales do not improve.
Mendizábal said his customers are a barometer of the broader economy. First-time home buyers are in the market for lots of new furnishings while homeowners with discretionary income buy when they feel flush. Now, he said, the former have nearly disappeared and the latter "are hanging on to their old mattresses."
With consumers pulling back, governments that just finished bailing out the financial system are now looking to help the broader business sector. There is little doubt that both the European Central Bank and the Bank of England will cut rates again later this week.
In Germany, the Continent's biggest economy, cabinet approval for a 50 billion euro, or $63.1 billion, plan to help industry and consumers, which includes a tax credit for first-time auto purchases, could come as early as Wednesday. Meanwhile, Nicolas Sarkozy, the French president, has proposed support for job creation and a government fund to protect local companies with beaten-down share prices from "foreign predators."
The pain did not hit home in Zaragoza until General Motors announced just a few weeks ago that it planned to lay off 600 of its 7,000 workers for up to a year and that it would suspend production for at least two weeks to work off inventories.
Zaragoza, which at peak capacity is capable of churning out more than 2,000 subcompacts, small minivans and delivery trucks a day, was one of seven GM plants in Europe to go on hiatus in October.
As recently as this past spring, demand was still so strong that Romuald Rytwinski, the director of the plant, had to rely on overtime to produce enough cars.
The overtime disappeared over the summer, but there was little warning that auto sales would plunge so abruptly.
Indeed, Europe's entire auto sector is now suffering, with Daimler cutting its earnings forecast by 1 billion euros in late October, while Renault and Fiat have also issued profit warnings.