Spanish PM attempts to send ‘message of calm’

MADRID - Agence France-Presse

Spanish Prime Minister Mariano Rajoy, speaking at an economic forum over the weekend, tries to reassure the Spanish public that Spain will eventually exit the financial crisis.

Prime Minister Mariano Rajoy sought to reassure Spain on June 2 that the country would eventually exit the financial crisis, after a dismal week that saw its borrowing costs soar.

Speaking at an economic forum in Sitges in eastern Spain, Rajoy said he was sending a “message of calm” as fears mount that Spain will need an international rescue to pay its bills.

“Spain is a very solid country, although right now, no one seems to remember this,” he said.

Doubts about Spain’s solvency rocked global markets this week and saw the interest rate on 10-year government bonds hit a record 5.48 percentage points on Friday, as Spanish markets slumped to lows not seen since April 2003.

The country “will get through the storm through its own efforts and with the support of our European partners,” the prime minister added.

“Because what’s at stake isn’t just the economic future of Spain but the very future of European monetary union.” Rajoy’s message comes after the Spanish budget minister and other officials on Friday took a similar tack, telling reporters the government was confident of the country’s solvency.

Spain is Europe’s fourth-largest economy and has been battered by a real estate crash and record unemployment of about 25 percent.

Plunging housing values

Plunging housing values saw private and banking assets drop and eradicated a source of plentiful income for the Spanish regions.

Spanish bank Bankia has asked the state for 19 billion euros ($24 billion) to repair its books, in addition to 4.5 billion euros already injected, the biggest rescue in Spanish banking history. But Rajoy said “I have no doubts about the vast majority of financial institutions in Spain.”

Crisis pushes shops over the brink

MADRID - Agence France-Presse

Plummeting sales and rising taxes have sent tens of thousands of shops over the brink since Spain’s economic crisis erupted.

Cesar Calle’s general store, “Lemon Tea”, which opened 15 years ago in a working class district of Madrid, is no exception.

“Total clearance sale in desperation” says a sign posted up in the shop. The same words are emblazoned on the staff’s tee-shirts.

The shop once drew 1,000 customers a day but sales have plunged 30 percent since the crisis struck in 2008.

Calle, 53, has given up trying to save his business. “This severe crisis has been going on for three years and we can’t go on any more,” he said. “Customer numbers are down. Spending power is too. And taxes have more than doubled. We can’t take it.” In the aisles, a few bargain hunters inspect shelves of multicolored flower pots, glassware, furniture, and decorations, all being liquidated.

“Right now in Spain, any business that tries to follow the rules and do things properly, as we should, will have nothing but losses,” Calle said.

Since the start of the crisis tens of thousands of businesses have closed. According to the Spanish confederation of commerce, another 75,000 shops could pull down their shutters by the end of this year.
Shopkeepers now fear a rise in VAT, which the European Commission may demand in return for allowing Spain an extra year until 2014 to cut its public deficit to 3.0 percent of economic output, from 8.9 percent last year.

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