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Message: Spain's Emergency Meeting
It looks like El Presidente has just called an emergency meeting in order to delay Spain's financial collapse. At best, their emergency stimulus package will buy them about a month. It will be a long long way down for Spain over the coming months even with rigged data.
Regards - VHF
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Spain Boosts Simulus Package As Growth Falters
By Andrew Hay
MADRID, Aug 14 (Reuters) - Spain approved tax cuts and an extra 20 billion euros ($29.82 billion) in emergency credit on Friday in a bid to avert recession after second quarter growth hit a 15-year low and economists warned the economy was shrinking.
Spanish Prime Minister Jose Luis Rodriguez Zapatero interrupted his holidays to hold an emergency cabinet meeting that approved previously announced plans to eliminate inheritance taxes and rebates on value added taxes.
Those measures, meant to inject 7.8 billion euros into the economy, now go to Congress.
Zapatero earmarked 20 billion euros in low-cost loans for small businesses and public housing between 2009 and 2010 and set a timetable for 24 reforms to cut business costs and red tape.
That was on top of 10 billion euros in tax rebates and credit announced in April and took the size of the economic stimulus package to around 40 billion euros.
Ahead of Friday's emergency meeting, Spain reported second quarter growth fell to 0.1 percent, its lowest level since late 1993 when Spain emerged from its last recession.
Zapatero highlighted the fact Spain was the only one of the euro zone's four largest economies not to shrink between April and June.
"We are going to work hard so Spain doesn't enter the negative growth other countries have fallen into," Zapatero told a news conference. "We face a situation of economic stagnation and a steep slowdown."
RECESSION ALREADY HERE?
Zapatero's popularity has dropped to an all-time low this year after Spain plunged into a crisis he long predicted would never happen.
Unemployment rose to the highest rate in the European Union in June after the global credit crunch burst Spain's property bubble, forcing bankrupt building and real estate firms to lay off hundreds of thousands of workers.
Analysts said Zapatero's package would hopefully raise poor competitiveness in the service sector and help Spain cut economic dependence on construction and credit.
"These are reasonable measures but I don't think we'll begin to see their effect until 2010 and the short term impact will be minimal," said economist Alfonso Garcia-Yubero at Banif.
Spain's Popular Party said the cabinet meeting had been little more than a photo opportunity for Zapatero to repeat proposals, in some cases, for the third time.
"You have to ask yourself whether he understands Spain is in economic crisis," said PP economic spokesman Cristobal Montoro.
Deutsche Bank economist Susana Garcia said Spain's economy has begun to contract in the third quarter.
"We expect a mild recession in the second half of this year," she said.
Economy Minister Pedro Solbes says Spain has all but exhausted room for additional spending and existing measures could push public accounts into their first deficit in four years during 2008.
Zapatero expects growth of 1 percent in 2009 before a recovery to around 3 percent in 2010 as consumer spending and housing demand recover.
Analysts fear years of stagnation unless Spain can raise productivity growth that is among the lowest in the euro zone.
"The precondition is that Spain gets its act together on the export front," said ING Senior Economist Martin van Vliet. Spanish price competitiveness has deteriorated very sharply in the past decade."
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