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Zapatero launches defense of economic record

Published on 10/01/2008

10 January 2008

MADRID – Figures released yesterday showing a notable downturn in Spanish mortgage lending provided more grist to the mills of economic doomsayers as Prime Minister José Luis Rodríguez Zapatero launched a vigorous defense of his government’s handling of the economy.

According to data from the Spanish Mortgage Association (AHE), the value of outstanding property loans climbed only 1 percent in October from the previous month as the drain on liquidity in the wake of the US subprime mortgage crisis took its toll.

In the 12 months to October, the pace of lending slowed to 16.8 percent from the levels of around 25 percent a year earlier, but with outstanding loans rising to a record EUR 1.029 trillion. Bloomberg quoted an AHE spokeswoman as saying that the October rate was the slowest since February 1997, just before a decade-long property boom kicked in.

But it seems safe to say that the boom is well and truly over now, with house prices in some areas starting to fall, and with overall house price inflation slowing to about 1 percent at the end of last year from levels of close to 20 percent at the height of the surge.

The latest mortgage figures came on the heels of a spate of negative indicators, which cast a shadow over what only a few months previously had been a rosy economic scenario. Inflation hit its highest level in December for over a decade, unemployment rose by the biggest amount in five years, while consumer confidence plunged.

With general elections just two months down the road and after having largely ignored the issue since the Socialists took office in 2004, the opposition Popular Party has now seized on the figures to accuse the government of wasting the country’s economic bonanza.

The government has cut its GDP growth figure estimate for this year from 3.3 percent to 3.1 percent, but the opposition still claims the forecast is optimistic, a view shared by the IMF, which is predicting a rate of 2.7 percent. GDP is estimated to have grown 3.8 percent in 2007.

In a speech yesterday, Zapatero took the opportunity to go on the counterattack, stating his "full confidence in the present and future" of the economy, and lambasting the PP for a "lack of patriotism" and "unjustified alarmism" that was harming confidence.

Zapatero insisted that the economy would continue to grow at 3 percent this year and create 1.6 million jobs over the next four years. He also predicted double-digit increases in corporate earnings for 2008, and noted that Spain surpassed Italy in per capita income in 2006 for the first time. "We have exceeded Italy, now we have France within reach," he said.

PP leader Mariano Rajoy yesterday rejected the opposition was putting across a doomsday message. "I am saying what everybody knows; what is an objective fact, while the government is saying everything is going well, and nothing’s wrong. That doesn’t make sense and it’s not true," he said.

[Copyright EL PAÍS / A. SIM 2008]

Subject: Spanish news