Spanish PM finally admits economy is in crisis

10th July 2008, Comments 0 comments

Zapatero finally drops “C” bomb on Wednesday night in a TV interview and sparks fears of a potential recession in the near future.

10 July 2008

MADRID - Prime Minister José Luis Rodríguez Zapatero finally admitted on Wednesday night in an Antena 3 television interview that the Spanish economy was in "crisis".

Prior to using such a term, Zapatero as well as other government ministers had used scores of euphemistic synonyms to describe the downward spiral of the economy.

Some of these were: "gradual adaptation to allow the economy to correct itself," "slowdown," "rapid slowdown" and, now, the "C" word.

Attempting to play down the bombshell dropped by Zapatero, Economy Minister Pedro Solbes insisted Wednesday that he had used the term "crisis" on a number of occasions.

In a story published at the end of May by El Pais, Solbes equated "crisis" with "recession," which the Spanish economy is not experiencing at the moment. "To talk about recession is exaggerated," he said in the interview.

The technical definition of a recession is when the economy contracts in two consecutive quarters. This has not yet happened.

One of Solbes' and Zapatero's biggest critics on economic policy is Cristóbal Montoro, the economic spokesman of the opposition Popular Party.

"It was high time [that the prime minister start using the term]," he said, adding that the government had been overwhelmed by economic events.

According to Montoro, crisis means "a rise in consumer prices, mortgages, loss of jobs, higher unemployment and a fall in confidence to the lowest levels in Spanish history."

Interior Minister Alfredo Pérez Rubalcaba tried to calm fears over the economy on Wednesday after Zapatero had finally used the "C" word, although the prime minister did add the caveat that it was not the term he preferred to use.

"We grew at 4 percent rates and now [our economy] will expand by 2 percent," Rubalcaba said, comparing the country's present growth rates to those of Germany and France. Rubalcaba stressed, however, that if the term crisis meant recession, then Spain was not in a crisis.

So how deep is the economic "crisis?" If we look at official government forecasts, they have fallen from 3.3 percent at the turn of the year - long before the 9 March general election which returned Zapatero's Socialists to power - to below 2 percent now.

The National Statistics Institute (INE) has mirrored such forecasts, reporting in May that the economy had slowed in the first quarter of the year to 0.3 percent compared with the previous quarter. This was the slowest pace of growth since 1995.

Matters on the economic front are, unfortunately, expected to get worse before they improve.

Economy Minister Solbes said recently that he saw second quarter-on-quarter GDP growth to dip "below 0.3 percent." Since the second-quarter economic figures will be published in mid-August, not too many people will be paying attention to them because it is the height of the holiday season.

[El Pais / E. Tessieri / Expatica]

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