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Spain vows to avoid economic stagnation

Spain’s economy will avoid stagnation despite activity slowing over the past six months, Finance Minister Elena Salgado said Thursday.

With world markets watching anxiously for signs of weakness in Spain as it fights to pay off its debts, the government has refused to lower its growth forecasts despite economists’ warnings of a slowdown.

“We are in an economic slowdown,” Finance Minister Elena Salgado told RNE national radio on Thursday.

“We began to feel it in the second quarter and in this third quarter it seems that activity has not recovered to the same level as the first quarter of this year.”

But she said Spain’s second-quarter growth was in line with the eurozone average and insisted: “We are going to keep growing in the third quarter, the fourth quarter, and much more next year.”

Spain’s economy grew 0.4 percent in the first quarter of 2011 and slowed to 0.2 percent in the second on a quarter by quarter basis, according to official figures.

The Bank of Spain warned Wednesday that the economy is showing anaemic growth in the third quarter, too, casting doubt on the government’s target for growth of 1.3 percent in 2011 and 2.3 percent in 2012.

Spain’s ruling Socialist government is widely expected to lose power in a November 20 election to the conservative opposition, which is ahead in opinion polls.

Spain’s weak economy and 20.89-percent unemployment rate are serious concerns for world markets, which fear Madrid will struggle to erase the red ink in its accounts and pay off its long-term sovereign debt.

Financial instability in Greece has raised new doubts about sovereign debt in fragile eurozone economies, including Spain’s. Meanwhile cuts to social spending in Spain are beginning to bite.

The government’s spokesman Jose Blanco on Friday said Madrid was maintaining its growth targets but acknowledged that “in a new and difficult climate, they will be difficult to achieve””