MercoPress. South Atlantic News Agency

Spain faces worst recession in half a century

Spain's economy shrank by the most in more than 15 years in the fourth quarter in what may become the worst recession in half a century pushing the unemployment rate to the highest in Europe.

"This economic crisis is without precedent" said President José Luis Rodríguez Zapatero. Growth in Spain, which outpaced the Euro region for more than a decade on a debt fuelled construction boom, will contract 2% this year as the budget deficit swells to more than twice the European Union limit of 3%, according to the European Commission. Once the motor of job creation in the Euro region, Spain now accounts for almost all the increase in joblessness which reached 14%, (almost 3.3 million) almost double the EU average. Citigroup Inc. in Madrid forecasts Spain's economy will shrink 3% this year, sending the unemployment rate to 18% in 2010. Spain's auto industry, which contributed about 5 percent of GDP, accounts for part of the jump in unemployment as car sales plunge and export demand weakens. Cement sales plunged 52% in January compared to a year ago. The global credit crisis hit Spain just as the construction boom was coming to an end, turning what was expected to be a "soft landing" into a deeper crisis for the heavily indebted economy. The number of companies starting bankruptcy proceedings almost quadrupled in the fourth quarter from a year earlier and loan arrears have more than tripled. Moody's Investors Service said this week that Spain and Ireland were at the most risk of downgrade among the 18 countries that carry the company's top rating.