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Spanish economy grew by 0.2 percent in the second quarter between
April and July, which was a slightly faster pace then 0.1 percent,
as many economists were expecting. This was the highest quarterly
rate of growth since the first quarter of 2008 when the economy
grew 0.4 percent. There are still fears by analysts that this delicate
growth will slow in the final half of the tear as austerity measures
take effect. Despite Northern European countries faring well with
their recovery plans, the euro zones expected growth was well short
of the 0.7 percent.
Astrid Schilo, an economist at
HSBC said, “The bottom-line is that growth in the first and
second quarter seems to have been boosted by fiscal stimulus measures,
such as the car scrappage scheme, which will fade in the second
half of the year”.
The data marked the second consecutive
quarter of growth after the country crept out of an 18-month long
recession in the first three months of the year.
The austerity plan, which is worth
65 billion euros, was released by government with its sole aim to
reduce the deficit to 3 percent by 2013. “We definitely think
Spain will fall back into recession in the second half of the year
as austerity measures begin to bite,” said Ben May at consultancy
Capital Economics.
Both the prime minister and economy minister Elena Salgado reiterated
that growth may slow in the final half of the year, but they said
it was unlikely to contract. As the government steady’s the
improvement to meet its targets in cutting its deficits, the growth
targets will be watch by the markets with great anticipation.
Also in the news, Spain is going to restore €500m cut from
the state infrastructure investment budget for next year in a slight
easing of its austerity plans. Spain reiterated that it will fulfill
its promises to keep cutting the annual budget deficit in line with
agreed targets.
José Blanco, the public works minister, said ““More
than 50 projects will benefit in 2011 as a result of these additional
resources,” He added that most of the country’s 17 autonomous
regions would benefit and that one priority was the development
of the A8 motorway linking northern Spain to France and the rest
of Europe.
Spanish officials say the extra €500m – which represents
only about 0.05 per cent of the country’s gross domestic product
– was made possible in part because the cost of servicing
the country’s debt is lower than forecast.
Mr. Zapatero and his Socialist
government, in common with the leaders of other crisis-stricken
developed economies, are trying to balance the requirements of austerity
against the need to keep the economy growing – if necessary
through government public works program’s of the sort favoured
at the start of the crisis. This problem is particularly difficult
for Spain, who has a large budget deficit and suffers from an unemployment
rate of 20 percent, affecting more than 4m Spaniards.
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