Spain tumbles into recession

Spain has toppled back into recession, official data confirmed Monday, but the government warned there was no alternative to austerity to build future growth.

Spain's gross domestic product shrank by 0.3 percent in the first quarter of 2012, equalling the slump in the final quarter of 2011, according to preliminary data from the National Statistics Institute.

The recession returned barely two years after Spain emerged gingerly from the last downturn.

Despite growing opposition to cuts during a recession with 24.4-percent unemployment in the first quarter, Economy Minister Luis de Guindos said fiscal restraint was more essential than ever.

"The Spanish government does not see any incompatability between austerity and economic growth," he told a news conference in Santiago de Compostela after talks with his German counterpart Wolfgang Schaeuble.

"Budget discipline is unavoidable if we want to build solid foundations and sufficient financing for economic growth in our country -- it is a necessary condition," he said.

Tens of thousands of people took the streets on Sunday to protest against austerity measures by Prime Minister Mariano Rajoy's conservative government, especially those affecting health care and education.

"Looking ahead, we fear that things are likely to get worse before they get better," warned ING economist Martin van Vliet.

"Indeed, the ongoing drag from real estate and the sheer scale of Spain's planned fiscal adjustment -- more than four percent of GDP this year -- mean that the recession will almost certainly deepen in the coming quarters, pushing unemployment to even more dramatic highs."

Doubts about Spain's ability to meet its deficit goals have been amplified by the plight of the banks, many bogged down in bad loans extended during a property boom which collapsed in 2008.

Standard & Poor's on Monday downgraded the ratings of the top Spanish banks, including Santander and BBVA, after slashing the country's credit standing because of the deficit and recession.

The banks affected include Santander and its subsidiary Banesto, BBVA, Banco Sabadell, Ibercaja, Kutxabank, Banca Civica, Bankinter and the local unit of Barclays.

The government said it was studying a scheme to allow banks to split off their bad loans and place them into a separate agency but without financial help from the state.

An economy ministry official said banks that joined the scheme would have to set aside financial provisions that recognise the sharply reduced market value of the loans, extended during the housing bubble.

"If the valuation of the assets is correct, the possibility of separating property assets from bank balance sheets is something that I think makes sense and is positive for the entities," De Guindos said.

"It allows them to free up capital and fundamentally allows the banks to focus on their core business which is banking and not real estate," he said.

Bank of Spain figures on Friday showed commercial banks held problem real estate loans worth 184 billion euros ($243 billion), some 60 percent of their property portfolio at the end of 2011.

The ratio of bad loans -- those at least three months in arrears -- hit an 18-year high in February of 8.15 percent of total credit extended.

Spain aims to lower the public deficit -- the shortfall in revenues to spending -- to 5.3 percent of GDP this year and 3.0 percent of GDP next year, after allowing it to hit 8.5 percent of GDP in 2011.

The accumulated public debt is officially forecast to leap to 79.8 percent of GDP this year from 68.5 percent at the end of 2011.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • Southwest transport terminal construction start still in limbo

    The construction of the country’s first intermodal transport facility is in limbo as both the government and the winning private concessionaire are waiting on each other before finally pushing through with the contract signing. Transportation Secretary Joseph Emilio Abaya said the ongoing titling of the project site for the R2.5-billion Integrated Transport System (ITS) Southwest Terminal should not delay the concession agreement signing, which has been indefinitely postponed since February …

  • Jesuit school confers honors on Deles, Ferrer, Iqbal

    Despite heavy opposition from the alumni and even parents of students, Xavier University – Ateneo de Cagayan conferred on Presidential Adviser on the Peace Process Teresita Quintos-Deles a degree on Doctor of Humanities, honoris causa Wednesday. The Jesuit-run university also recognized the other major players in the ongoing peace process between the Government of the Philippines (GPH) and the Moro Islamic Liberation Front (MILF) as it awarded GPH peace panel chair Miriam Coronel-Ferrer and …

  • Mobile market tapped for saleable items worth P21B

    With more than P21 billion worth of saleable items in Philippine households, online classifieds website OLX Philippines is aiming to tap this market by targeting mobile phone users who could be potential sellers and buyers of second hand items. OLX Philippines hopes to provide better support to mobile users with the OLX app since 50 percent of the website’s traffic is generated by mobile users. “We will soon become a mobile first company,” said OLX Philippines co-founder RJ David in a press …

  • Clark to host drag racing

    Drag racing takes an exciting turn as top guns try to push their respective bids in the third leg of the 2015 Philippine Drag Racing Championship Northern Series at the Clark International Speedway.Former US servicemen William “Bill” Hand and John Ryzia of the Angeles City Hot Rod Association (AHRA)-Garage Power hope to steer their respective American V8 muscle cars to repeat wins to secure solo leadership in their respective divisions. ... …

  • The greatest city in the world

    Flag carrier Philippine Airlines (PAL) proudly brought back our flag to the Big Apple when it landed at the JFK Airport last March 15, after an 18-year hiatus. The Manila-Vancouver-New York route 18 years ago was terminated due to an expensive leasing arrangement and the Asian financial crisis. JFK Airport at Queens Borough is 15 miles to midtown Manhattan, connected via the New York subway train system. Consider it normal if you can make it to Manhattan under two hours. …

  • The future of the BPO/KPO industry

    One of the few economic sectors in which the Philippines is a global player is the Business Process Outsourcing/Knowledge Processing Outsourcing (BPO/KPO) industry. According to a recent report of the Everest Group entitled “Global Trends in the Contact Center Market and Opportunities in the Philippines,” our country is the leader in the offshore/nearshore English Contact Center Outsourcing (CCO) market with some 36% share. In the Philippines, the growth has been close to 20% over the last …

  • Ars gratia artis

    The Ateneo Art Gallery, widely recognized today as the first museum of Philippine modern art showcasing works by postwar Filipino artists. Its “pilot,” Ateneo President Fr. Ramon Jose Villarin, SJ, admits that it “runs on the fuel of the generosity and munificence of its donors.”ARTISTS, MODELS, & MEDICIS. Last Monday, 23 March, four recent acquisitions were added to the collection. A Fernando Amorsolo life-size portrait of Liliana de Asis (1952) was a gift of Francisco and Mila de Asis and …

  • Baranda, Dumlao star in Vios Cup

    Defending champion Pauland Dumlao and showbiz personality Phoemela Baranda won their respective heats at the start of the Vios Cup Season 2 held recently at the Clark International Speedway in Pampanga.Dumlao of Team Toyota San Fernando took the second heat of the Sporting Class category while Baranda ruled the first heat of the Promotional Class division to open the second staging of the event organized by Toyota Motor Philippines. ... …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options