EuroCrisis: Spain in Deep Recession
Spain today officially downgraded its already feeble economic performance in 2010 and 2011.
Spain’s economy grew just 0.4 percent last year, not the 0.7 percent previously stated, the National Statistics Institute said. And output shrank 0.3 percent in 2010 rather than declining 0.1 percent, it said.
The downwards revision to the 2011 growth figures was a result of a change to external demand figures, which showed exports were slightly weaker than first thought. Revised data come before Tuesday’s release of final data for gross domestic product data for the second quarter, which are expected to confirm output fell by 0.4 per cent on a quarterly basis.
Spain’s Economy Minister Luis de Guindos told the Spanish news agency EFE that the European Central Bank (ECB) must deploy unlimited bond buying in the secondary market according to the August 18, interview and said that the government will study the details of the ECB debt-buying plan which is likely to be detailed before mid-September Eurogroup meeting before Spain takes action in applying for more European aid.
According to Reuters citing three euro zone sources on Thursday, Spain started to negotiate with the euro zone partners over conditions for aid to bring borrowing costs lower, yet Spain did not formally request aid yet.
The market is closely monitoring European leaders and the ECB for any insight or signal for the coming move, especially in anticipation for a September decision by the ECB to move ahead of the Eurogroup, which till now remains unlikely.
The data this week will shed more light on the deteriorating economic conditions across the euro area and in Spain in particular with abysmal second quarter data expected to be release.
The economy is expected to contract an unrevised 0.4% in the second quarter according to data this week, with 1.0% contraction on the year. The ailing banking sector, record unemployment and deteriorating businesses are all combined with tough austerity that is keeping the economy in recession.
Spain already attained the bailout for its ailing banking sector of 100 billion euros and was hoping of an early 30 billion euro tranche this month which so far seems also unlikely to help the nation stabilize its troubled lenders. This adds more pressure on Spain to meet its obligations especially amid public resentment and lack of confidence with unemployment running at 24.6% in the second quarter.
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Shayne Heffernan Ph.D.
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Shayne Heffernan oversees the management of funds for institutions and high net worth individuals. He is also an active consultant working with Corporations around the World.
He is recognized as one of the leading Economists in South East Asia, as well as the preeminent authority on ASEAN. His opinions and forecasts are widely read by decision makers in the region and Internationally.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.
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