Spain says GDP shrank once more

Spain says GDP shrank once more

MADRID - The Associated Press
Spain says GDP shrank once more

Spain’s Treasury Minister Montoro seen yesterday at Parliament. REUTERS Photo

Spain’s central bank said yesterday the country’s economy continued to shrink, contracting by 0.4 percent during the third quarter compared with the previous three months, increasing pressure on Prime Minister Mariano Rajoy to seek help from Europe.

This is the fifth quarter in a row that Spain’s economic output has shrunk. The country’s economy also contracted by 0.4 percent in the second quarter and 0.3 percent in the first quarter and is forecast to show a 1.5 percent fall this year and 0.5 percent in 2013.

The central bank figure is an estimate. Official figures are due to be released by the National Statistics Institute on Oct. 30.

The bank said consumer demand fell by 1. 2 percent - although the decline eased a little in the third quarter due to increased spending ahead of a sales tax increase on Sept. 1.

Spain is in its second recession in three years with near 25 percent unemployment. The country is one of the focal points in Europe’s financial crisis - if Spain defaults on its debts or needs a full-blown bailout, the finances - and credibility- of the 17-country group that uses the euro could be stretched to breaking point.
In September the European Central Bank said it was prepared to buy unlimited amounts of bonds in countries struggling with their debts. This has helped the country by pushing its borrowing costs lower. But Rajoy has held off triggering the actual purchases. The government has introduced austerity measures and financial and labor reforms in a bid to convince investors it is getting a grip on its accounts.