The eurozone crisis intensified as Spanish economy fell deeper into recession in the fourth quarter of 2012 as budget cutbacks and increased unemployment forced households to cut spending, it emerged today. Spain, the eurozone’s fourth largest economy, reported that its GDP fell 0.7% in fourth quarter of 2012, which was more than double the rate of contraction in the previous quarter, and worse than the predicted 0.6% drop by Bank of Spain. The figures indicate that Spain is experiencing its sixth consecutive quarter of negative growth.
In the light of the dismal report, the European Commission indicated that it would work to ease budget goals of Spain for the fourth time in a year as unemployment in the country rose to a record 26% at the end of Prime Minister Mariano Rajoy’s first year in power. The data from the National Statistics Institute show the Herculean task in front of the Spanish government if it has to put public finances back on a sustainable footing, despite an easing of bond market pressure in recent months.
Analysts opine that without economic growth Spain will be under struggle to get out of the growing debt burden, which has put it under spotlight of the eurozone crisis. The Bank of Spain delivered a small piece of good news when it said that the return of international investors to Spain’s battered debt market, has not translated into the real economy, although it has allowed the government to conduct a large chunk of its 2013 borrowing at the start of the year, potentially easing the pressure on it for months to come.
It may be noted that Spain’s economy plunged into recession in 2011 due to a fall-out of property market and has struggled to emerge out of the scenario intensified by heavy public and private spending cuts and rising levels of unemployment.