Spain's leader gives final 'state of nation' amid crisis

28th June 2011, Comments 0 comments

Spain's prime minister delivered his final state of the nation address on Tuesday, vowing to crack down on debt and battle an economic crisis that has unleashed mass protests.

Prime Minister Jose Luis Rodriguez Zapatero, who will not stand in general elections due in March 2012, said he would curb spending by powerful regions, whose debts are a major concern on financial markets.

Madrid will propose a cap on regional budgets next month, so as to "guarantee fiscal sustainability in the mid term," the prime minister told parliament.

The Spanish government aims to reduce the public deficit to less than six percent of gross domestic product in 2011 on the way to bringing it below the EU's three-percent ceiling in 2013.

But markets fear the debts of regional governments, at about 121 billion euros, could compromise those goals.

Fears of a Greek sovereign debt default have led to investors demanding higher returns before buying the debt of other debt-troubled eurozone countries such as Spain.

The risk premium on Spanish 10-year bonds compared to safer-bet German bonds hit 2.79 percentage points shortly before Zapatero spoke, nearing a peak struck last November of 2.83 percentage points.

The crises of Ireland, Portugal and Greece fed uncertainty in the eurozone and pushed up the costs of external financing for countries such as Spain, Italy and Belgium, Zapatero said.

But joblessness was his deepest concern.

"The main worry for Spaniards is the still too slow pace of recovery and the pressing need to get back to creating employment," said Zapatero, whose Socialist Party is expected to face a rout in the next elections.

The prime minister said Spain was slowly recovering, with five consecutive quarters of economic growth and an acceleration expected in the second half of this year, along with export growth of 14 percent last year.

But Zapatero lamented that unemployment had soared to 21.29 percent in the first quarter of 2011, the highest in the industrialised world. For under-25s the unemployment rate is 45.4 percent.

Even discounting that some people may be employed in the black economy, the magnitude of unemployment, especially for the young, was "unacceptable," he said.

A movement of "indignant" protests against joblessness, austerity and corruption erupted in Madrid on May 15 and fanned out as word spread by Twitter and Facebook.

An estimated 200,000 people took to the streets on June 19 to vent their anger, and the movement plans to hold an alternative state of the nation debate in its birth place at a central Madrid square, Puerta del Sol.

Zapatero said the protests were of "unquestionable interest to democratic leaders" and should be respected.

"I understand the impatience to see the end of the tunnel. I understand it because I feel that impatience each and every day," he added.

Mariano Rajoy, leader of the opposition Popular Party which enjoys a doube-digit lead over the Socialists, repeated his call for early elections, saying a new government was needed to put an end to Spain's "slow agony".

"What Spain needs is that the polls are opened so that citizens can chose who governs them," he said.

Zapatero has said he intends to stick to a March general election in order for the government to finish off its reforms.

© 2011 AFP

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