Spanish economy poised to stabilise, claims minister
SPAIN'S economy shrank further in the second quarter but looks set to stabilise over the rest of the year while the government continues to push structural reforms and budget austerity, Spain's Economy Minister Luis de Guindos said yesterday.
European leaders on Friday agreed to allow the eurozone rescue fund to inject aid directly into problematic banks, bypassing the sovereign government, and intervene on debt markets to support treasuries facing high funding costs.
While most analysts saw last week's summit as a defeat for German policy, Mr de Guindos was careful to avoid crowing.
"Everyone has come away from this important summit a winner. It is the euro which has won. From now on, we must all contribute," he said during an event at conservative think tank FAES.
Spanish GDP shrank by 0.3pc quarter on quarter in the first three months of the year.
The government expects the economy to contract by 1.7pc year on year in 2012, but many analysts have warned deep austerity measures could make the slump worse.
The conservatives, who inherited from the outgoing Socialists one of the eurozone's highest public deficits, at 8.9pc of GDP in 2011, have said they will shrink the shortfall to 5.3pc this year and 3pc in 2013.
Since taking office in December, Prime Minister Mariano Rajoy has announced budget savings worth almost 5pc of GDP for this year and passed a labour market reform and reforms for the banking sector, badly hit by a burst property bubble.
Spain has applied for up to €100bn to recapitalise some of its debt-laden banks, a credit line which is likely to come before the direct recapitalisation rules, agreed at the summit, are put in place.
Canadian Finance Minister Jim Flaherty, who is visiting Ireland, said yesterday that last week's deal was good for Europe.
European leaders made a "bold step" in agreeing to move towards a banking union last week, and must move forward in implementing those plans to regain market confidence, he told RTE radio.
"The sooner they can get to a more comprehensive plan, the better," Mr Flaherty said. "If they get it done by October, and it is comprehensive, then I think we will have avoided a crisis."