Spain: recession comes fast, the OECD doubt the resumption future

The recession is approaching at full speed in Spain, which was confirmed Wednesday the downturn at the third quarter, while the prospects of rebound are limited according to the OECD, which calls for painful reforms to the workers.

The National Statistics Institute (INE) has confirmed provisional figures published last week: GDP contracted by 0.2% in the third quarter compared to the second, unprecedented in 15 years.
If it is not yet technically in recession-two consecutive quarters of falling GDP-, Spain is unquestionably one foot. Daily Finance and Investment Tips / Make Money by Learning

This scenario is not excluded, "said coyly commented Wednesday Secretary of State for the Economy David Vegara. "The environment is complex and the data are not good," he noted.

"We will without doubt a relatively low economic behavior up to half of next year," he added, predicted a return "to positive growth" in late 2009.

The Organization for Economic Cooperation and Development (OECD) seems to share this optimism.

It is for all of 2009 a decline of 0.9% of GDP and affirms that the prospects for recovery are limited, except to adopt reforms, some of which would be painful for workers.

"Some factors behind the robust performance in the past are losing their force and do not leave hope that a modest rebound," said the organization in its economic survey of Spain published Wednesday.

Among these engines today seized included plenty of credit, low interest rates, a massive influx of immigrants and low-skilled women working, says she.

Spain is emerging from a period of strong growth (+3.7% in 2007), who had one of the most dynamic economies of the eurozone, boosted by the construction sector. But the housing market turned, and now draws brick Spain to the bottom.

The OECD recommends including Spanish Socialist government of Jose Luis Rodriguez Zapatero, whose popularity is declining, reducing the protection of workers under permanent contract.

"It would make it less generous severance pay related to permanent contracts, and reduce the difference in level of protection between temporary and permanent contracts" to promote the entry of young skilled labor market in positions corresponding to their qualifications, according to the OECD.

"If canceling all clauses of the inflation in collective bargaining is not feasible in the short term, these clauses should be redefined so as to minimize side effects," she adds.

The OECD also recommended to increase competition in certain sectors (energy, transport, post) or to improve education.

Another difficulty for the government: its budgetary leeway melted.

While Spain has succeeded in past years to generate surpluses and reduce its debt, the government is now planning the 2009 budget so nails the European Stability Pact which provides for limiting public deficits to 3% of GDP .

"The expansionary fiscal reached its limits", according to the OECD, referring to expenses incurred by the state to try to revive the activity.