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Spanish Economy Slows to Zero Percent

Mon 14th Nov 2011

Spain´s National Institute of Statistics (INE) released figures on Friday of last week detailing how the country´s economy returned zero growth in Q-3 of the year, following positive growth of 0.2% as seen in Q2.

With domestic consumer spending continuing to slide, largely due to ongoing fiscal reforms and cutbacks to control Spain's state deficit and an unemployment rate of over 20%, are all significant factors in the continued stagnation of the economy.

Domestic demand fell by 0.8% in Q-3 and although there have been slight increases in business investment, this has now become threatened due to Spain's banks now being forced to increase their capital to 9% as a result of the recent reforms to the sector agreed in Brussels recently.

Last week the EU commented that Spain may need to make even more spending cuts in order to realise their budget deficit target.

A more detailed version of the initial report will be published this week, ahead of Spaniards going to the polls to vote in the general elections next week.

Analysts estimate that the Spanish economy will grow by 1.3% over 2011, but focus must now turn to the reduction of the deficit, which is expected to be problematic because of the slowdown.

If the country´s economy returns to recession then revenues for the government through taxes will also fall, making it difficult to reduce the deficit any further without more spending cuts, which would in turn result in a fall in domestic spending.

Comment on this Story

When oh when will Spain admit that the total administration is completely out of control. Having lived in Spain for the past ten years and having experienced the corruption of all of the authorities, seen the total apathy of all the police services to enforce anything, it is no wonder that it is in such a complete shambles.
Patrick Ballinger - Mon, 14th Nov 2011

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