Zapatero: Worst Financial Crisis Since WW2

Spain will spend an extra EUR 11 billion on public works and other recession-busting measures to fight a spike in unemployment after the global financial crisis, Prime Minister Jose Luis Rodriguez Zapatero said Thursday.

"This is a strong arsenal to fight the slowdown in economic activity," he told parliament, adding the world was facing its first global recession since World War II.

"A crisis as quick and intense as this one is without precedent and it has taken its toll on employment in our country," he said.

The package, which will be approved at a regular cabinet meeting on Friday, represents 1.1 percent of Spain's gross domestic product (GDP) and could create 300,000 jobs in 2009, he said.

The bulk of the funds, EUR 8 billion, will go to local municipalities to be used in public works projects; EUR 500 million will be used for research and development, and EUR 400 million will be earmarked to modernise police barracks.

The prime minister said EUR 800 million would be used to support the "strategic" auto sector which has suffered an "important" drop in demand in the European Union and which was affecting Spain.

Spanish car plants will make 300,000 fewer vehicles this year compared to 2007, a 10.3 percent drop to a level of production that is similar to that recorded in 1997, Spain's auto manufacturers' association ANFAC said Tuesday.

Spain's auto sector - which exports 80 percent of its production and accounts for 10 percent of gross domestic product - has appealed for state aid to face up to the decline in demand that has led several factories to cut jobs or reduce working hours.

Spain is experiencing an abrupt economic slowdown as the global credit crunch puts the squeeze on an already weakened construction sector, causing the unemployment rate to hit 11.3 percent in the third quarter: its highest level in over four years and the highest rate in the 27-member European Union.

The Spanish economy contracted for the first time since 1993 in the third quarter, shrinking 0.2 percent, leaving it on the brink of recession, which is defined as two consecutive quarters of negative growth.

Last week, the Paris-based Organisation for Economic Co-operation and Development (OECD) predicted the Spanish economy would contract 0.9 percent next year, with unemployment rising to 14.2 percent.

Zapatero unveiled the package a day after the EU proposed its own 200-billion-euro stimulus plan.

"It is time to show our determination, to have confidence in the action of governments, of the public sector, of public investments and social cohesion," he said.

Zapatero's socialist government, which was re-elected to a second term in March after a campaign whose central theme was the slowing economy, has already spent EUR 16 billion this year, mostly in the form of tax cuts, to bolster activity.

The leader of the main opposition Popular Party, Mariano Rajoy, called the government measures "useless", arguing what Spain needs are structural reforms and austerity measures to fix its ailing economy.

"All you bring here is more public spending, more public deficit, more indebtedness," he said.

Story from Expatica

Like this? Then share with your friends and colleagues!