Spain says economy set for recovery in early 2013

Spain’s economy contracted by 1.4% last year but ministers predict recovery Spain's recession-battered economy is faring a little better in early 2013 after slumping at the end of last year, Economy Minister Luis de Guindos said Tuesday as doubts grew over the prospects for debt-laden southern European economies.The Spanish economy had "clearly" improved from the final three months of 2012, when output plunged by 0.8 percent, De Guindos told an economic forum.
The Spanish economic chief did not, however, predict an economic expansion in the first quarter of 2013.
"The first quarter of this year will be clearly less bad than the previous quarter," De Guindos said.
Spain is immersed in a double-dip recession after failing to recover convincingly from the collapse of a decade-long property boom in 2008, an economic disaster that has sent the unemployment rate soaring to a record 26 percent.
The Spanish economy, the eurozone's fourth-largest, contracted by 1.4 percent last year, the second worst yearly slump since 1970.
Prime Minister Mariano Rajoy's government is predicting a return to economic growth in 2014 if the country sticks to a programme of cost-cutting measures and of reforms aimed at improving economic efficiency.
The government has admitted that it will have to revise its forecast for an economic dip of only 0.5 percent this year. The Bank of Spain is predicting a 1.5-percent plunge in output this year and only a "modest rebound" in 2014.
Doubts are growing over the prospects for southern European states that are fighting to slash deficits while their economies wallow in recession.
Portugal is preparing a new battery of spending cuts after the country's constitutional court rejected a number of austerity measures aimed at respecting the terms of its international bailout.
Spain recorded an annual public deficit equal to 7.0 percent of gross domestic product last year, missing a 6.3-percent target it had agreed with the European Union.
Now, the Spanish government wants Brussels to agree to relax its 2013 deficit target to about 6.0 of GDP from the previously agreed 4.5 percent, a government source said this month.
Spain also wants the European Union to agree to give it an extra year to bring its deficit to below the bloc's maximum threshold of 3.0 percent of GDP, the source said.