Spain recession deepens in fourth quarter

Spain's economy sank deeper into recession in the fourth quarter of last year as high unemployment and biting austerity measures prompted households to slash spending, official data showed Thursday. The eurozone's fourth largest economy shrank by 1.4 percent on an annual basis in 2012, a slightly better performance than the decline of 1.5 percent forecast by the government. The economy shrank 0.8 percent in the final quarter of 2012 from the previous three months, after dropping 0.3 percent in the third quarter, the national statistics institute said.The figures were slightly bleaker than preliminary data released last month by the statistics institute which saw the economy contracting by 0.7 percent in the final quarter on a quarterly basis and by 1.37 percent for the entire year. Spain is grappling with a double-dip recession and 26 percent unemployment, having never recovered from a real estate crash in 2008. Prime Minister Mariano Rajoy's conservative government forecasts the economy will return to growth in the second half of 2013. It forecasts an economic contraction of 0.5 percent in 2013 followed by an expansion of 1.2 percent in 2014, a significantly more optimistic forecast than that of most analysts and international organisations.Activity is being cramped by his government's programme of spending cuts and tax rises, aimed at saving 150 billion euros ($194 billion) between 2012 and 2014, which have prompted mass street protests. The Spanish economy appeared to continue its contraction in the first quarter of 2013 due to sluggish domestic demand, the Bank of Spain said Wednesday in its latest monthly economic bulletin. The government has vowed to lower the public deficit from the equivalent of 9.4 percent of annual gross domestic product last year to 2.8 percent in 2014. Analysts say those targets will be hard to reach in a period of declining economic activity. Rajoy on Wednesday announced that Spain missed the budget deficit target agreed with the European Commission as the shortfall reached 6.7 percent of GDP in 2012, compared with a target of 6.3 percent.