Spain's economy shrinks 0.1% in 2010

16th February 2011, Comments 0 comments

Spain's economy shrank 0.1 percent in 2010 as its unemployment rate scaled the highest peaks in the industrialized world, official data showed Wednesday.

Spain slashed spending through the year to rein in a bulging public deficit and fight off the threat of an Irish-style debt crisis.

The feeble economic activity was evident in a jobless rate that ended the year at 20.33 percent, the highest in the Organisation for Economic Cooperation and Development (OECD).

Spanish total economic output, or gross domestic product, edged up 0.2 percent in the last quarter of 2010, the National Statistics Institute said, confirming preliminary figures released February 11.

But over the year as a whole, Spain's GDP declined 0.1 percent, making it one of only three eurozone countries along with Greece and Ireland to have contracted in 2010.

The Spanish economy 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 meagre growth rates in the first half of 2010 -- 0.1 percent in the first quarter and 0.2 percent in the second -- before showing zero growth in the three months to September.

Prime Minister Jose Luis Rodriguez Zapatero's Socialist government has predicted 1.3-percent growth in 2011 and a jobless rate barely declining to 19.3 percent.

Spain's government has cut spending, announced sell-offs and reformed the labour code and pension system in an effort to regain the confidence of international investors on whom it depends to finance its debt.

Spain's public deficit soared to the equivalent of 11.1 percent of GDP in 2009, the third-highest in the euro zone after Greece and Ireland.

It aims to reduce the public deficit to 6.0 percent in 2011 and to get below the European Union limit of 3.0 percent of GDP by 2013.

© 2011 AFP

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