P.M. Rajoy Says Spain Faces Tough Year Ahead
By HAROLD HECKLE
MADRID (AP) â¿¿ Spain faces another tough year as it grapples with recession, a deep financial crisis and 25 percent unemployment, its prime minister said Friday.
In his end-of-year assessment, Mariano Rajoy said the country's crisis had been worse than anticipated.
"We are facing a very tough year, especially in its first half," he said. "Spain's economy will remain in recession for some time, but we expect it will improve in the second half of 2013."While Rajoy was speaking, investor concerns government over attempts to shore up the main cause of Spain's problems â¿¿ its shaky bank system â¿¿ sent shares in lender Bankia falling nearly 27 percent. Spain's economy has been hit hard by the collapse of the country's property market in 2008, which left ordinary Spaniards and banks struggling under the weight of toxic loans and assets. The country's government rushed to prop up its financial system, sending its debt levels higher. To get its deficit under control, the government introduced a series of harsh austerity measures, such as spending cuts and tax rises. This has had a damping effect on the Spanish economy, pushing it into recession and driving up unemployment. In its bid to overhaul the financial industry, Spain had to seek a â¿¬100 billion ($132.7 billion) lifeline from the 17 European Union countries to strengthen its failing banks. Some analysts said Rajoy acted too slowly to shore up failing banks. "Some measures, like bank restructuring, were taken too late," said Guillermo Aranda, CEO at ATL Capital investment company. The prime minister said Friday that structural reforms and "the restructuring of the financial sector" were key elements in Spain's road to recovery. However, the stock market showed it was not convinced by the progress made, as shares in Bankia SA fell for a second day, dropping 27 percent to â¿¬0.40 as investors rushed to offload their holdings in the bank.
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