Spain's leader gives swansong address amid crisis

28th June 2011, Comments 0 comments

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

Prime Minister Jose Luis Rodriguez Zapatero, whose Socialist Party is expected to face a rout in general elections due by the end of March 2012, said the economy was mending too slowly and joblessness was too high.

The Spanish leader, who has said he will not stand for election again, promised to crack down on 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 debt held by regional governments, at about 121 billion euros, could compromise those goals.

Moody Investors Service warned in a report this month Spain's government would find it "very difficult" to meet deficit-cutting targets because it could not curb wayward regions such as Catalonia, whose economy is the size of Portugal's.

Fears of a Greek sovereign debt default have infected investors, who demand higher returns before buying the debt of other debt-troubled euro zone 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 had fed uncertainty in the euro zone and pushed up the costs of external financing for countries such as Spain, Italy and Belgium, Zapatero said.

But joblessness was the 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," Zapatero said.

"The state of the nation today is and continues to be the state of the battle against the crisis, its consequences, progress on employment and everything we do to push it," he said.

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, and 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.

"The government has adopted, and will adopt, all the reforms that are needed and will take them as far as is recommended to improve competitiveness and encourage growth and the creation of jobs," the prime minister added.

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.

© 2011 AFP

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