Spain remains stuck in recession

[February 11, 2010]  MADRID (AP) -- Spain's troubled economy remained stuck in recession in the fourth quarter, unlike other major European countries, as official figures released Thursday showed output shrank for a sixth consecutive quarter.

The news of the 0.1 percent drop in gross domestic product in the last three months of 2009 came a day after Prime Minister Jose Luis Rodriguez Zapatero said Spain was close to following other European nations out of recession.

Meanwhile, Spain's large budget deficit remains a concern to the European Union amid fears that the crisis over Greece's large debt load could spread to other countries with large budget shortfalls.

The fall compared to 0.3 percent decline in the third quarter.

Spain's once-buoyant economy started shrinking in the third quarter of 2008 as a boom fueled by real estate construction and consumer spending collapsed. Unemployment now stands at 18.8 percent and last year the government ran up a budget deficit equal to 11.4 percent of GDP, nearly three times the EU limit, as tax revenue fell and benefit payments to the jobless swelled.

Zapatero drew criticism for upbeat remarks he made Wednesday during a question-and-answer session in Parliament.

"The Spanish economy is no worse off than it was six months ago," he said, even though the deficit figure is double what it was then and the number of unemployed has increased by about 500,000.

The government's ballooning deficit is a source of worry for investors and markets fretting over whether Spain could be in line for a debt crisis like the one in Greece.

Public opinion polls say Zapatero would lose to opposition conservatives if elections were held now.

Compared to the last three months of 2008, the fourth-largest economy in the eurozone contracted 3.1 percent, and for the whole year it fell 3.6 percent, the worst performance in decades.

The figures are preliminary, and final numbers will be released on Feb. 17. Thursday's data confirmed an estimate released last week by the Bank of Spain.

[Associated Press; By DANIEL WOOLLS]

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