Spain faces adverse economic conditions that could last longer than expected, but they should be followed by a strong recovery, Spain’s prime minister said on Sunday.

“This adversity is proving tough, above all, because it came on very fast,” Jose Luis Rodriguez Zapatero told Spain’s El Mundo newspaper. “This bad situation will last longer or last less, but we are going to recover with strength, and social policies are not going to be cut back.”
Spain’s Socialist government does not expect the economy to contract, as those of Germany and France did in the second quarter, and rules out a recession before growth recovers to around 3 percent in 2010.
“The economy is the government’s fundamental concern. But I am calm and optimistic because we have a strong country,” Zapatero said.
An increasing number of analysts say the Spanish economy began shrinking in the third quarter, will enter recession by year end, and risks years of stagnation after the collapse of a credit-fuelled housing boom.
Zapatero’s comments followed an outlook from the United Kingdom’s finance minister on Saturday that Britain’s downturn would likely be deeper and last longer than first feared.
The Spanish prime minister said Spain was supported by a 20 million workforce where 1 in 3 holds a technical qualification, infrastructure as good as any in Europe, strong public accounts and a fivefold rise in per capita income in three decades.
He ruled out a pact similar to that reached in 1977 between the government, political parties, companies and unions to combat inflation which at that time soared over 40 percent.
“Spain can face an adverse economic cycle, like the one we have, with greater ease,” Zapatero said.
Spanish inflation is among the highest in the euro zone at 4.9 percent while unemployment rose to 11 percent in July, the highest level in the euro zone, Eurostat data show.
Many analysts see unemployment rising to around 15 percent or 3 million next year as hundreds of thousands more construction, real estate and service sector workers lose jobs.
Zapatero vowed to keep up social spending after the central government’s deficit doubled between June and July as he rolled out 10 billion euros ($14.74 billion) in tax rebates and low cost credit to head off recession.
“What bothers me are citizens that may suffer real difficulties. I will center my attention on them,” Zapatero said.
($1=.6784 Euro)
(Source: guardian.co.uk)