- Title: SPAIN: Recession drags on in Q4
- Date: 18th February 2010
- Summary: MADRID, SPAIN (RECENT) (REUTERS) RECENTLY CONSTRUCTED BUILDINGS LYING VACANT EXTERIOR OF UNFINISHED BUILDING CONSTRUCTION WORK AT A STAND STILL VARIOUS OF CONSTRUCTION STORE WITH LARGE SIGN READING "DISCOUNTS"/ PEOPLE SHOPPING
- Embargoed: 5th March 2010 12:00
- Keywords:
- Location: Spain
- Country: Spain
- Topics: Economic News,Domestic Politics
- Reuters ID: LVA7K0WVH16FZP5NDM5850RZSQWZ
- Story Text: Spain's economy remained in recession in the last quarter as construction and government spending fell while domestic demand and exports improved, final data showed on Wednesday (February 17).
Spain, testing the markets' faith on Wednesday with a 15-year syndicated bond sale, has now contracted for seven straight quarters, and the data still point to a weak if improving economy in 2010.
The economy shrank by 0.1 percent in the fourth quarter from a quarter earlier, in line with a flash estimate made last week and as forecast by economists. It compared with a 0.3 percent fall in the third quarter.
Joblessness has neared 19 percent following the the disappearance of the credit which fuelled a property boom.
Spanish Prime Minister, Jose Luis Rodriguez Zapatero, said the government will focus on creating more jobs.
"Job creation is always on our minds. It's behind every measure we adopt and is the goal of every action we take," he said.
The prime minister asked the opposition to back austerity measures.
"I also promised that the government will present an Austerity Plan. This is the perfect moment to put it into force because if we had done it earlier, the consequences for the Spanish economy would have been extremely bad," he told Spain's parliament.
The data showed a slowdown in the pace of decline in household consumption to -3.3 percent, from -6.6 percent the previous quarter. However, on a quarter on quarter basis it rose by 0.3 percent, the first rise since 2007.
That was not enough to convince economists of a serious turn around any time soon.
The opposition too attacked the prime minister over the results.
"You don't inspire trust because you denied reality with the intention of tricking. Now, you say we are just ready for leaving the crisis. How have you drawn this conclusion," said opposition leader Mariano Rajoy.
While the spread on Spanish Treasury bonds has spiked amid market nerves over Greece, many economists say that the country's relatively low level of public debt to GDP means it faces little immediate financing problems.
Spain saw over 6.5 billion euros (8.9 billion U.S dollars) in interest in the first hour of bookbuilding for its 15-year bond on Wednesday and analysts expected the issue to go smoothly.
Mid-swaps guidance for the bond issue was +85 to 90 basis points, according to IFR, a Thomson Reuters service.
The GDP breakdown showed domestic demand was likely aided in the fourth quarter by a pick-up in car sales, with a car scrappage scheme introduced by the government boosting purchases.
The final GDP data also confirmed a contraction of 3.1 percent in the fourth quarter compared with the same period a year earlier, and by 3.6 percent for the whole of 2009, the biggest fall in over half a century.
The government forecasts the economy to grow a feeble 0.3 percent this year, some way off a Reuters poll prediction for the euro zone economy to grow 1.3 percent.
Any recovery will not be helped in 2010 by unemployment nearing 20 percent. A planned rise in VAT from the start of July will also likely hold back consumer spending further in the second half of the year, say economists. - Copyright Holder: REUTERS
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