Live News From Spain As It Happens

Credit ratings agency Standard & Poor's warned Spain Friday that its weak economic growth prospects could undermine its plan to rein in its budget deficit, making a debt downgrade even more likely.

Though short of the levels being posted in Greece, investors are increasingly worried about Spain's budget deficit - and skeptical about the government's ability to push through sharp cutbacks to right the situation.

The government has announced both tax rises and spending cuts - not all yet specified - to reduce its deficit back towards the 3 percent limit that euro rules prescribe.

In a statement, S&P said Spain's deficit would likely remain above 5 percent of the country's gross domestic product through to 2013 against the government forecast of 3 percent, and that as a result the debt burden could rise to above 80 percent of GDP by 2012.

S&P said it also expects much weaker economic growth than the Spanish government and that there was a "significant implementation risk" with regard to the current plan to reduce the deficit, which is estimated at 11.4 percent of GDP in 2009.

Spain, which has still to get out of recession, is expected to grow by an average annual rate of 0.6 percent between 2010-13, according to S&P, way down on the Spanish government's forecast of 1.5 percent.

S&P said it saw downside risks relating to the government's revenue collection assumptions in particular, largely because Spain's tax base is "highly sensitive" to domestic demand and has been sensitive to the real estate sector, which has collapsed over the last couple of years.

"Neither of these sources is likely to be a strong contributor to revenue growth over the next several years," S&P said.

S&P said it was maintaining its negative outlook on Spain's double A+ rating, which it assigned in December, in the absence of "more aggressive and tangible actions" by the authorities to tackle Spain's economic and fiscal problems.

"Any deterioration over and above our current expectations could put further downward pressure on the ratings," S&P said.

Source:  TheMoveChannel.com

The ranks of Spain’s unemployed increased by 2.03 percent last month compared with January, bringing the jobless total to more than 4.13 million, the Labor and Immigration Ministry said Tuesday.

That figure is the highest since 1996.

While new unemployment claims in February were down by nearly 50 percent from the same month in 2009, the number of jobless has risen by more than 648,000 from January 2009, an increase of 18.6 percent.

More than half of last month’s job losses were in the service sector, the ministry said.

Now representing around 10 percent of Spain’s 46.7 million residents, immigrants have suffered badly in the recession, with the jobless rate among non-natives soaring 27.61 percent over the last 12 months.

Labor Minister Celestino Corbacho stressed the 12-month reduction in the rate of job losses and an increase in the number of people registered with social security, which serves as a proxy for the level of formal employment.

She also suggested February’s unemployment figure was boosted by an increase in first-time job-seekers.

The Spanish economy remained in recession during the last three months of 2009, with GDP falling 0.1 percent from the third quarter and 3.1 percent from the fourth quarter of 2008, according to the latest report from the country’s central bank.

Banco de España also offered a provisional estimate that Spain’s gross domestic product suffered an overall decline of 3.6 percent last year, the biggest drop in decades.

Spain’s economy has contracted for seven consecutive quarters.

Job woes and tight credit will likely prompt Spaniards to continue boosting their savings, representing a drag on consumption, the bank said.

The bulletin highlighted a halt to the sharp decline in home sales, but did not forecast a quick return to positive growth in transactions. Real estate and construction largely powered the Spanish economic boom of the late 1990s and early 2000s.

Banco de España said the Spanish economy could gain from a boost in exports to other nations that have already begun to emerge from the global recession. EFE

Source:  laht.com