Oasis Fm – Tenerife's official British radio station

Spain’s economy in dire straits - 12.06.2009
THERE are fears that Spain’s worst recession in decades will lead to deflation, following a decline in consumer prices for the third month running. They fell 0.9% in May, from the same period last year, as companies cut prices in the face of the sharp economic downturn in Europe's fifth-largest economy. Deflation means a fall in prices throughout the economy and not just in one sector. Long-term, it could lead to a decline in the value of collateral owned by householders and companies, making it more difficult for them to borrow. Spanish inflation, which has generally been higher than the eurozone average over the past decade, is now slowing more sharply than the rest of the region as its economy slumps. A further worry for the economy came with the news that Spain’s housing sales dropped by 16.5% in the first quarter of the year, against the same period in 2008. A total of 104,703 properties were sold during the period, down from 125,419 in the previous quarter, according to the government’s Housing Ministry. It meant that on an annual basis, the decline was 34.19%. A recent study by Spain’s second-largest bank, BBVA, predicted housing prices in Spain would fall nearly 30% between 2008 and 2011 before they started to recover from the collapse of the property boom. Spain entered into its first recession in 15 years at the end of 2008, and unemployment has soared to 17.4% in the first quarter of 2009, the highest level in the 27-nation European Union. Yet Spanish Finance Minister Elena Salgado was optimistic last month that inflation could turn positive again at the end of the year.