Spanish economy plunges in final quarter of last year
Spain’s economy shrank at the fastest pace in more than three years in the final quarter of last year, official data showed on Wednesday, casting a shadow over the prospects of nearly six million unemployed.
Total economic output slumped 0.7 per cent from the previous quarter, the steepest decline since the second quarter of 2009, after a 0.3-per cent dip the previous quarter.
The report by the National Statistics Institute showed the recession, which started in the final months of 2011, still tightening its grip on the eurozone’s fourth-largest economy.
Just days earlier, a separate report showed Spain’s unemployment rate shot to 26.02 per cent in the fourth quarter – the highest level since the re-birth of Spanish democracy after death of General Francisco Franco in 1975 – as 5.97 million people sought in vain for work.
Latest figures also showed that gross domestic product for the whole of last year declined by 1.37 per cent, slightly better than the 1.5-per cent contraction predicted by the government.
“Amongst all the bad news, this figure is a bit better than expected,” said Gayle Allard, economist at IE Business School.
“I have hope that this was the worst quarter. From here on we will improve. Businesses are doing what they have to do: seeking an exit through foreign markets,” Allard added.
“If the government pursues its promised reforms that will also help. In training, in collective bargaining, in unemployment benefits and the duplication of work in the public sector... there is a lot that can be done.”
Economy Minister Luis de Guindos said in Davos, Switzerland on Friday that he expected the economy to return to growth in the second half of this year.
But activity is being curbed by his government’s programme of spending cuts and tax rises, aimed at saving 150 billion euros (US$194 billion) between last year and next year, prompting mass street protests.
The government has vowed to lower the public deficit from the equivalent of 9.4 per cent of annual gross domestic product in 2011 to 6.3 per cent last year, 4.5 per cent this year and 2.8 per cent next year.
Analysts say those targets will be hard to reach in a period of declining economic activity.
On Tuesday, for example, the northeastern government of Catalonia requested nine billion euros from a rescue fund created by Spain to save its financially beleaguered regions.
Of the total amount, 7.7 billion euros would be earmarked to pay out maturing debt and international loans, the statement said, and the remainder set aside to ensure the region reaches a this year deficit target of 0.7 per cent of GDP imposed by the central Spanish government of Prime Minister Mariano Rajoy.
The request came less than a week after Catalonia’s parliament approved a declaration of sovereignty that could lead to a vote on self-determination for the region whose leaders want greater autonomy from Spain.
Proud of their distinct language and culture, many Catalans blame the region’s financial difficulties on tax income redistributed to other regions of Spain.
Catalonia is home to 7.5 million of Spain’s total population of 46 million. It accounts for more than a fifth of Spain’s economic output and a quarter of its exports.