Spain's PM heads to Asia in search of new investment

8th April 2011, Comments 0 comments

Spain's Prime Minister Jose Luis Rodriguez Zapatero will visit China and Singapore next week in search of new investments to shore up his country's embattled economy, government sources said Friday.

Zapatero arrives in Beijing on Tuesday where he will meet with Premier Wen Jiabao, Vice Premier Li Keqiang, Chinese financial authorities, bankers and investors.

He moves on to Singapore on Wednesday for talks with Prime Minister Lee Hsein Loong and investors before returning to China to attend the Boao Forum for Asia, an annual conference of government and business leaders and academia.

He returns to Spain on April 15.

The prime minister decided to make the trip "taking into account China's weight as an emerging economy, Singapore's as a major financial centre and the Boao Forum's growing importance as a platform for Asian players," one government source said.

"Several important economic agreements" will be signed in Beijing during that visit, he said.

"Strengthening our bilateral relations with China is crucial," he said.

"China's investment in Spain is low for its size. As a holder of debt its position has been increasing, reflecting the confidence and interest in the Spanish economy."

Zaparero's Socialist government has slashed spending and raised taxes to rein in a ballooning public deficit and ease market fears that Spain will need an EU bailout like the ones granted Ireland and Greece last year and that envisaged by Portugal.

And China's help could be important.

Li Keqiang offered to buy about 6.0 billion euros worth of Spanish public debt during a visit to Spain in January.

Concerns that eurozone debt troubles could spread to Spain pushed bond rates sharply higher last year, adding to the costs of servicing the country's sovereign debt.

But such fears appear to have eased since then as Madrid strengthened bank balance sheets, cut spending and pursued economic reforms.

The government has also strived to distance itself from Portugal's request for international financial assistance, insisting it was "not at risk" of seeking a similar bailout for its battered economy.

Any such rescue would be bigger than those of Greece, Ireland and Portugal combined, possibly threatening the whole eurozone project.

The Spanish economy contracted 0.1 percent in 2010 after shrinking 3.7 percent in the previous year following the collapse of a property boom that had fueled growth for more than a decade.

The crisis sent the unemployment rate soaring to 20.33 percent at the end of 2010, the highest among OECD countries.

Spain's public sector debt also hit an 11-year high in the fourth quarter of 60.1 percent of gross domestic product.

© 2011 AFP

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