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Spain's GDP fall worse than previously estimated

Spain's GDP fall worse than previously estimated

Spain's once-buoyant economy contracted more than previously estimated in the second quarter _ by 1.1 percent over 3 months and by a record 4.2 percent over the year _ as consumption and investment plummeted amid the recession, the government said Thursday.
The quarterly number is revised from the 1.0 percent decline that the National Statistics Institute had announced two weeks ago in a preliminary calculation.
The yearly drop is also worse than the initial estimate of 4.1 percent and the sharpest drop since 1970, when records began. Domestic demand _ consumption and investment _ fell 7.3 percent.
The numbers highlight how Spain, once one of Europe's great economic success stories, remains mired in recession even as other EU countries like France and Germany start to recover from the economic downturn. This month both of those countries reported unexpected growth, technically lifting them out of their worst recession in decades.
Spain's economy had posted more than a decade of solid and sometimes robust growth _ and expanded 3.6 percent as recently as 2007 _ but has imploded as a housing boom and torrid, credit-fueled consumer spending collapsed.
The unemployment rate now stands at 17.9 percent, more than double what it was in late 2007. The statistics institute said that over the past year alone 1.37 million full-time jobs have been eliminated.
With tax revenues down because of the recession and government spending soaring to pay for joblessness benefits and economic stimulus measures, the government is running a deficit it predicts will approach 8 percent by the end of the year, nearly triple the 3 percent set under European Union rules.
The idea of raising taxes to plug the gap has emerged.
Development Minister Jose Blanco said last week that the government should consider hiking income taxes on higher-earners. Opposition parties screamed foul, saying the middle class would end up getting hit because so few people in Spain earn more than even ⁈ ($85,620) a year and aiming high would thus yield little. The average salary is about ⁈ a year. The most crowded tax bracket runs from ⁈ to ⁈.
Finance Minister Elena Salgado told a parliamentary commission Wednesday that "everything, absolutely everything, is being reviewed." But she ruled out higher taxes on wealthier people, saying they already paid enough, and insisted the government has not yet formally discussed raising income taxes.
But many Spanish newspapers interpreted her remarks as signaling some kind of tax increase will be brought up when the legislature starts debating the 2010 budget in a few weeks.


Updated : 2020-12-03 12:52 GMT+08:00