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Spain's Economy Dwindling - WSJ.com

Spain's economy contracted 0.4% in the first quarter from the fourth, the country's central bank said Monday, the latest evidence that Spain's efforts to rein in government spending could be feeding a downward economic spiral.

The central bank numbers, released about a week before the government's official data, confirm that Spain is far from a much-needed economic rebound--in which government austerity measures have damped growth, which could in turn make it tougher for Madrid to achieve ambitious austerity targets.

On an annual basis, the economy contracted 0.5%, the first negative reading after seven consecutive quarters of modest annualized growth, the Bank of Spain said in its monthly economic report. This marks the official end of a mild recovery between late 2010 and late 2011, after a deep slump that began in 2008 in tandem with the country's property bust.

In the fourth quarter of last year, Spain's gross domestic product contracted 0.3% from the third quarter, but grew 0.3% on an annual basis.

The central bank also said Spain's economy, the fourth-largest in the euro zone, faces several quarters of uncertainty and downside risks related to developments in the euro-zone debt crisis. Earlier this year, the bank said it expects the Spanish economy to contract 1.5% in 2012. But private-sector economists have warned of a deeper drop as Madrid slashes government spending.

by Nomad on Mon Apr 23rd, 2012 at 04:43:23 PM EST
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Zakaria: Europe suffers from too much austerity - Global Public Square - CNN.com Blogs

A new poll in the United States shows that Americans are still deeply frustrated at the slow pace of the economic recovery. That's understandable. Unemployment stays stubbornly high. But I was just in Europe, and they think America is booming.

Consider this: the U.S. economy is on track to grow between 2 and 3 percent this year. In Europe, by contrast, half the eurozone economies are going to actually shrink this year - and not one major European country will grow over 1%.

Last Thursday, Christine Lagarde, the head of the International Monetary Fund, and former French Finanace Minister of France, said there were "dark clouds" hanging over the global recovery and that the eurozone was at the "epicenter of potential risk." Borrowing costs for countries like Spain, Italy and Greece are rising again.

What is going on? Didn't it look like the Europeans had managed to avert a crisis only a few weeks ago?

Yes it did. Mario Draghi, Europe's new Central banker, had adopted a version of Ben Bernanke's policies and injected money into the European financial system and economy. But his efforts are now being undercut by the German Bundesbank, which reflects Germany's obsession about inflation even at the cost of growth.

The larger failure, shared across Europe, has been too much austerity.

by Nomad on Mon Apr 23rd, 2012 at 04:45:12 PM EST
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How long will we have to hear about 'Germany's obsession about inflation'? When will leaders of other countries start to talk about Germany's choice of deflation for others? And how long before that deflation comes to Germany? Unless policies change my bet would be that Germany will start to see deflation by January, 2013. All will express shock at the decline in German exports to other EMU nations.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Apr 24th, 2012 at 12:51:20 AM EST
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EUobserver.com / Economic Affairs / IMF doubles its funds, warns Europe

Finance ministers from emerging countries over the weekend joined Europe in doubling the coffers of the International Monetary Fund (IMF), while asking for a bigger say in its governance and warning the eurozone to speed up anti-crisis measures.

Chaired by Singapore's finance minister Tharman Shanmugaratnam, the IMF meeting on Saturday (21 April) concluded that "continued progress" in the eurozone is needed to lower the borrowing costs of governments and "secure financial stability."

"Undertaking bold structural reforms will be crucial to boosting confidence and productivity, facilitating rebalancing within the monetary union, and promoting strong and balanced growth," the final communique says.

For his part, US treasury secretary Timothy Geither noted that more action is needed from the European Central Bank (ECB).

by Nomad on Mon Apr 23rd, 2012 at 04:46:20 PM EST
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Timothy Geither noted that more action is needed from the European Central Bank (ECB).

It is easier to speak the truth about other central banks than about your own. While The Fed has multiplied the monetary base, which has helped, it has steadfastly refused effectively to perform its most important function: to regulate properly the behavior of the banks that are members of the federal reserve system.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Apr 24th, 2012 at 01:05:05 AM EST
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