Spain returned to positive growth in fourth quarter: PM

30th December 2010, Comments 0 comments

Spain's prime minister said Thursday the country had returned to positive economic growth in the fourth quarter, and announced a hike in the minimum wage and in pensions for 2011.

In a year-end press conference following a cabinet meeting, Jose Luis Rodriguez Zapatero also said Spain would meet its public deficit target for next year, essential for easing market fears of a Irish or Greek-style bailout of its battered economy.

The Spanish economy, the EU's fifth largest, slumped into recession during the second-half of 2008 as the global financial meltdown compounded the collapse of the once-booming property market.

It emerged with tepid growth of just 0.1 percent in the first quarter and 0.2 percent in the second, but then stalled with zero percent growth in the third.

Zapatero said 2010 "has been a difficult year," but 2011 "should be a year in which we go from recession to recovery."

"The fourth quarter will have positive growth," the Socialist leader said, but added "we know it will be slow, weak growth."

He added that "despite the economic crisis, we continue to make a special effort at solidarity."

He announced the minimum wage will rise by 1.3 percent to 641.56 euros (851.60 dollars) a month and pensions by an average of 2.3 percent and the minimum rate by 1.3 percent.

Before the economic crisis, the government had forecast the minimum wage, one of the lowest in Europe, would reach 800 euros a month by 2012.

State pensions, except the minimum, were frozen as part of tough austerity measures introduced this year to slash the public deficit from 11.1 of gross domestic product last year to 9.3 percent this year, 6.0 percent next year and the eurozone limit of 3.0 percent in 2013.

"The deficit-reduction targets will be met in 2010 and in 2011," which will "generate confidence in the medium and long term," Zapatero said.

The Bank of Spain said earlier Thursday that the economy is seeing a "slight recovery, after the oscillations of recent quarters."

But, in its monthly report, it also warned that business confidence in the Spanish construction sector had hit its lowest point since the property bubble burst in 2008.

The Treasury announced Wednesday that the government will slash net borrowing from bond markets by nearly a quarter in 2011.

Investors have shown deep concern over the annual deficit being racked up by the Spanish government and its heavy reliance on the bond markets, leading them to demand higher and higher returns.

© 2010 AFP

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