Highlights
– June 23, 2008 Spanish Prime Minister Zapatero announces country faces “sharp economic slowdown”
– National unemployment rates expected to increase
– Credit crunch is being felt across Europe
On June 23, 2008, Spanish Prime Minister (PM), Jose Luis Rodriguez Zapatero, formally acknowledged the country was facing a sharp economic downturn, more dramatic than originally anticipated. Further, the PM announced predicted economic activity for the year 2008 would grow by less than two percent, below previous government predictions.
PM Zapatero is not alone in his current woes concerning Spain’s slowing economy, as we previously reported, fellow British PM Gordon Brown continues to fight against a declining national economy and subsequent lack of political support (Previous Report). In May 2008, British Bank of England Governor, Mervyn King, announced his bleakest assessment to date of the nation’s economy, and further indicated current food and energy price escalations meant the scope for interest-rates cuts would be limited.
The global economic crunch is making its way across Western Europe and shows no sign of slowing in the near-term. However, it is likely individual national efforts to stem the crisis will be successful in the short term.
PM Zapatero Announces National Economic Downturn
On June 23, 2008, addressing a crowd to speak on the state of the nation’s economy, Spanish PM Zapatero announced, “The Spanish economy is undergoing a strong slowdown, almost at a halt.” PM Zapatero continued, “We see weak growth in the short term, but not a long period of stagnation,” asserting economic activity should start to increase again in the second half of 2009.
Adding fuel to the flame, congressional spokesman on the economic for Spain’s opposition Popular Party, Cristobal Montoro, stated the government is “clearly overwhelmed” by the scope of the economic slowdown and suggested the country was facing a possible “recession.”
Purportedly, economic activity in the first quarter of 2008 has slowed to its lowest rate in 13 years, as the nation’s unemployment rate suffered its largest jump in 15 years. Commenting on the country’s internal problems, PM Zapatero stated, “In just a really short period of time, the Spanish economy has gone from growing at a good rate to an abrupt slowdown.”
Europeans Feel Global Crunch; Spain Prepares
The global economic credit crunch is deemed largely responsible for the current economic slowdowns occurring in Spain and elsewhere in Europe, to include, the United Kingdom (UK). As we previously reported, in May 2008, British Bank of England Governor, Mervyn King, announced his bleakest assessment to date of the nation’s economy, and further indicated current food and energy price escalations meant the scope for interest-rates cuts would be limited (Previous Report). The negative impact of the global economic downturn has left a deepening negative impact on British PM Gordon Brown. To this end, since taking office in June 2007, Brown has faced growing adversity due to the worsening national economic crisis. In recent months, PM Brown has intensified his efforts to battle against critics and supporters alike in an effort to implement a number of bills to counteract recent events, including a controversial plan scheduled to begin in November 2008 that aims to assist people struggling with the rising cost of homes and to extend flexible work patterns.
PM Zapatero is insisting the country will not fail in its efforts to combat the global situation and further stated, “Spain is better prepared than ever to face and overcome this situation.” In April 2008, PM Zapatero unveiled a US$28 billion spending plan to revive the nation’s economy, an effort it touts is the largest economic stimulation package announced by a European nation faced with the economic slowdown. Further, the PM announced his government’s plans to impose “austerity” measures to ensure public accounts remain balanced, an effort that is predicted to save at least 250 million euros between 2008 and 2009. Arguably a credit to the Spanish government, Spain is one of a few European Union (EU) member states to post a budget surplus in recent years.
We believe the global economic crunch is making its way across Western Europe and shows no sign of slowing in the near-term. However, it is likely individual national efforts to stem the crisis, such as Spain’s “austerity” measures, will be successful in the short term.