Spain says economy growing too slowly

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Spain's economy is expanding too slowly but the government is battling to boost activity and is not changing its 2011 targets, Finance Minister Elena Salgado said Tuesday.

The Spanish economy plunged into recession in late 2008 as the global financial meltdown compounded a property bubble collapse.

The economy steadied in 2010 and grew just 0.2 percent in the second quarter of 2011, not enough to make a dent in a towering unemployment rate of 20.89 percent.

"We are recovering more slowly than we would like, in particular more slowly as regards employment which is without doubt the main problem we have," the finance minister told Antena 3 television.

Spain has targetted 1.3-percent economic growth in 2011, well above the 0.8-percent forecast by the Bank of Spain and by Standard & Poor's and 0.9-percent growth tipped by BBVA Research.

"We are not changing our growth targets because we are doing everything we can to grow the maximum possible," Salgado said.

"It is true that if we had to make new forecasts it is possible that the figures would not be the same as those we have made," she conceded.

Salgado said Spain's economic growth in the second quarter was the same as the European average for the period.

As markets reel after Standard & Poor's cut Italy's credit rating, Spain is waiting nervously to hear from Moody's Investors Service, which has promised to decide by the end of October on a possible downgrade.

"I hope Moody's will take into account the reforms that are ongoing such as the constitutional reform," Salgado said.

This month, the government passed a constitutional reform to limit future budget deficits, trying to prove its determination never to slide deep into the red again.

It is now scrambling to raise extra money in 2011 to meet a deficit-cutting target: telling firms to pay tax installments early, lowering state spending on medicines and stimulating new home purchases with a tax cut.

Spain has promised to reduce its annual public deficit from the equivalent of 9.2 percent of gross domestic product last year to 6.0 percent of GDP this year, 4.0 percent in 2012 and 3.0 percent in 2013.

© 2011 AFP

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