Spanish Recovery Slower than Most
December 2nd, 2009
A Businessweek article referencing opinion from Standard & Poor’s states that the economic rebound in Europe will be uneven due to the availability of financing. Spain will suffer more than most.
Higher costs of capital and the unwinding of excessive leverage burden recovery prospects as Europe emerges from recession. The path to recovery will be long and narrow.
Consumer demand is likely to be weak in indebted countries such as Spain, the U.K., and Ireland, while the sharp deterioration in public-sector finances across the region looks set to constrain any growth from that quarter
Initial Eurostat estimates for the third quarter of 2009 show that the recovery within the EU remains uneven, with highly indebted countries remaining mired in recession between July and September. Spain’s GDP slipped 0.3% (after falling 1.1% in the second quarter).
Between 1997 and 2007, the gap between interest rates and nominal growth turned sharply negative for countries such as Greece, Spain, Ireland, and Portugal.
The reduction in private sector debt, slowly under way since early 2008, still has a long way to go, particularly in those highly leveraged countries such as Spain, the U.K., and Ireland.
This leads us to anticipate weak prospects for consumer demand. On the other hand, the sharp deterioration in public debt ratios will in our view constrain the public sector’s contribution to future growth.
But one striking observation is that labor market trends have been more resilient in 2009 than we anticipated. In other words, unemployment rates have not surged as much, or as early, as we originally forecast.
The only exception is Spain, where the jobless rate averaged 17.9% in the third quarter.
Story from Businessweek
Related Posts
- Spanish Economy Showing Signs of Recovery
- UK Recovery and the Spanish Property Market
- Spanish Economic Recovery Mediocre
