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Spain Edges into Second Recession Since 2009

Source: Bloomberg - Wed 21st Mar 2012
Spain Edges into Second Recession Since 2009

The rise in Spanish exports slowed in January, undermining the only growth driver left to the euro region's fourth-biggest economy as the strictest austerity push in decades tips it into a second recession since 2009.

Exports grew 3.9% from a year earlier in January, compared with 6.6% in December, and 32% last year, the Economy Ministry said in an e-mailed statement today.

Prime Minister Mariano Rajoy's People's Party government overhauled Spanish labor rules on Feb. 10, making it easier for companies to cut payroll in times of downturn. The move seeks to improve competitiveness while efforts to cut the euro region's fourth-largest budget gap weigh on demand.

The government forecasts domestic demand will shrink 4 percent in 2012, more than 4 times last year's rate. Public spending is seen contracting 11.5% after 2.2% last year, while a 24.3% unemployment rate will push household spending down 1.4%, after a 0.1% drop in 2011.

The economy will contract 1.7% as export growth slows to 3.4% this year from 9% last year and 13.5% in 2010, the government said on March 2.

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