Spanish Recession Eases as EU Shifts Away From Austerity Policy

Spain’s slump eased in the first quarter as the government pushes back its budget-deficit target to ease a fiscal squeeze that has weighed on the economy.

Gross domestic product fell 0.5 percent from the fourth quarter, when it declined 0.8 percent, the Madrid-based National Statistics Institute said today. That matched the median forecast of 19 economists in a Bloomberg News survey. Output fell 2 percent from a year earlier.

A six-year slump has pushed the jobless rate to a record 27 percent, curbing domestic demand and fueling anti-European sentiment among some voters who blame the European Commission for public-spending cuts. Unemployment will barely decline over the next three years, the government said last week, as it announced it will delay its timetable for narrowing the deficit to within the European Union limit.

The first-quarter Spanish GDP figure matches the estimate published by the Bank of Spain in its monthly bulletin on April 23. The 17-nation euro region shrank 0.1 percent in the quarter, according to a Bloomberg survey published on April 11. The official figures will be released on May 15.

Spanish Prime Minister Mariano Rajoy on April 26 unveiled new measures to boost credit to smaller companies and cut bureaucracy. His Cabinet also approved a plan to cut the budget gap of 10.6 percent of GDP to within the EU limit of 3 percent by 2016 instead of 2014. The commission endorsed the plan in a statement on its website.

With the euro area in its second year of recession, officials in Brussels and Berlin are backing away from austerity-first policies amid criticism from institutions including the International Monetary Fund. German Finance Minister Wolfgang Schaeuble, a leading proponent of budget discipline, yesterday announced a plan to boost investment in Spain.

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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