The Spain sliding further into recession

Madrid – The Spanish economy experienced its greatest decline for more than three years, leaded by the contraction of domestic demand in a context of mass unemployment and historical rigor, according to the Bank of Spain in the fourth quarter.
In the last three months of 2012, the fourth economy in the euro zone’s gross domestic product (GDP) fell by 0.6% compared with the third quarter, noted the Central Bank Wednesday in its monthly bulletin.
This is the most marked withdrawal a quarter since the second quarter of 2009, when the country’s economy was contracted by 1.1% in turmoil linked to the global financial crisis and the collapse of the housing bubble.
Spain, which has returned to the recession since the end of 2011, acknowledged a decline in GDP of 0.4% in the first and second quarters of 2012, and 0.3% in the third quarter.
This “recessive path” has “increased during the period from October to December”, said the Bank of Spain.
The monetary institution notes, in particular, demand for households and companies fell by 1.9% compared with the third quarter.
Consumption was particularly affected by the increase in VAT from 1 September and the removal of civil servants year-end bonus.
At the same time, tighter bank credit, in a context of crisis in the financial sector, as well as the record level of unemployment, affecting a quarter of the assets contributed to weakening domestic demand.
On the eve of the publication of employment figures, even that can be expected in “a further increase in” the Bank of Spain estimates the unemployment in the fourth quarter, “about 26 %” against 25,02% in the third quarter.
Throughout 2012, the Central Bank estimates that GDP fell by 1.3% from 2011, a figure lower than the official forecast of the Conservative Government, which builds on a 1.5% decline.
Provisional official figures of growth for 2012 will be published on 30 January.
“The contraction of 0.6% of the Spanish GDP in the fourth quarter comes to point to remind that, if the pressure of the markets on the country lean since the promise of intervention by the ECB, the fundamentals of the economy remain very fragile,” said the analysis firm Capital Economics.
Under the pressure of the markets and the European Union, the Government has increased the budget cuts and the tax hikes, to try to reduce its public deficit from 9.4% of GDP in 2011 and 6.3 per cent in 2012, then 4.5% in 2013 and 2.8% in 2014.
But according to analysts, this goal is hardly tenable and this cure of austerity postponed a bit more economic recovery. The Government has is himself resigned to a new year of recession in 2013, building on a decline of 0.5% GDP.