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Spain's economic decline is quickly turning into a political crisis for prime minister José Luis Rodríguez Zapatero, who has been called before the national Congress next week to explain what he plans to do about it.

In a move with few precedents, all the country's political parties – except Mr Zapatero's own socialists – have rounded on the prime minister as a fresh batch of data this week added weight to even the most pessimistic outlook for the economy.

Foremost of these were new figures on house sales, which fell 30 per cent year on year in the first quarter, and a dramatic slimming of the country's budget surplus, which was down to €2.72bn ($4.23bn, £2.15bn) at the end of May from €13.6bn a year ago. Buying by non-residents, which helped fuel Spain's 10-year construction boom, fell 26 per cent year on year, and nearly 50 per cent from the previous quarter.

With bad loan rates rising, and job uncertainty taking hold, what started as a construction downturn is now spreading to other sectors, as tighter credit conditions and consumer unease choke off investment and spending. Tour operators, supermarket chains and fashion retailers have recently noted a sharp slowdown.

In the industrial sector, manufacturers whose fortunes are linked to construction activity have seen a dramatic drop in sales in the past 12 months.

After two weeks of resistance, Mr Zapatero on Tuesday gave in to pressure from the parties' congressional officials to give a personal account of Spain's deepening crisis at a plenary session next Wednesday. In the upper house, senators voted down a decree needed to finalise next year's budget.

After playing down the deceleration to avoid electoral defeat in March, Mr Zapatero has recently had to face facts, partly because of the speed of the decline. On Monday, while addressing Spanish business leaders in Madrid, he admitted for the first time that gross domestic product in Spain would this year expand by less than 2 per cent, compared with 3.8 per cent in 2007.

"The Spanish economy is going through a sharp slowdown, almost to a standstill," he said, as he unveiled an emergency plan aimed at containing public sector spending and encouraging business investment.

Full story from FT.com

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