Spain struck in recession in final months: Central Bank

MADRID

A health worker holds up a sign reading, ‘With less staff, worse quality’ during a protest outside a public health office against cuts in the service, in Madrid. The austerity cuts are triggering public anger. AP photo

Mattered by high unemployment and a banking crisis, Spain remains stuck in recession in the final quarter of 2012, the central bank said on Dec 28.

The eurozone’s fourth-largest economy has been shrinking since mid-2011, pushing unemployment above 25 percent, and the outlook remains grim with a further contraction expected next year.

“The most recent data for the final quarter of the year, although still incomplete, points to a continuation of the fall in economic activity as a result of the contraction in domestic demand,” the Bank of Spain said in a monthly report.

The central bank pointed to indicators showing weak consumer confidence and retail sales, mixed fortunes in industry and a construction sector still reeling four years after a spectacular property market crash, Agence France-Presse said on Dec. 28.

Spain’s gross domestic product fell by 0.3 percent in the third quarter of the year, according to official data. The government is tipping an economic slump of 1.5 percent this year. It also forecasts a 0.5-percent contraction in 2013, but this is widely viewed as being optimistic. The European Commission and OECD, for example, say they expect Spanish economic output to tumble 1.4 percent next year.

Protests are growing in Spain as people decry the economic slump, unemployment and a series of austerity measures adopted by Prime Minister Mariano Rajoy’s right-leaning government. Massive aid to a bad-loan ridden and widely scorned banking sector has stirred further anger.

Bankia keeps falling

Meanwhile, shares in bailed-out Spanish bank Bankia were falling for a second day on Dec. 28, dropping more than 30 percent at one point during trading on the IBEX-35 stock exchange.

By midday, Bankia recovered slightly but was still trading down 25.2 percent at ?0.41 while the IBEX-35 dipped 1.8 percent, The Associated Press noted.

Officials with the country’s bank bailout fund revealed earlier this week that Bankia, which is in line for a 18 billion euros ($23.88 billion) bailout, was worth minus 4.2 billion euros. The Fund for Orderly Bank Restructuring revealed the extent of the bank’s negative value - more debts than assets - due to worse-than-expected losses on toxic property investments. Bankia’s falling share price also hit Banco de Valencia, another nationalized lender, whose stock fell 20 percent.