MADRID: Spain is engulfed in a long recession with little hope of a quick recovery, the OECD club of industrialised nations said Thursday.
Spain must quickly fix its banks to avert the "substantial risk" of being cut off from external financing and plunging into an even deeper recession, the body warned in a report.
"The economy is undergoing a prolonged recession," the Organisation for Economic Cooperation and Development said in a report, citing the 2008 global financial crisis and the bust of a Spanish housing boom.
"The prospect of an immediate recovery remains remote," the OECD said, noting that people and businesses were struggling to repay debts and the nation was stuck in a debt crisis.
Addressing Spain's 25-per cent unemployment rate, the highest since the return to democracy after the death of General Francisco Franco in 1975, the OECD urged drastic labour market changes.
It called for cutting compensation for unfair dismissal, considering abolishing an extension of industry-wide collective bargaining, and more training and job-search help for the young.
Spain's economy has been shrinking for 15 months, with output slumping 0.3 per cent in the third quarter, official data show, and the recession is expected to last right through 2013.
The OECD is forecasting Spain's gross domestic product will shrink 1.3 per cent in 2012 and decline by another 1.4 per cent in 2013 before a weak pickup of 0.5 per cent in 2014.
Spain's "immediate policy priority" is to restore trust in banks by fixing weak balance sheets, making orderly resolution of non-viable banks, and shifting bad assets into a new bad bank, the body said.
Spain's banks were now faced with high interest rates to find external funding, the OECD said.
As a result, they relied heavily on the European Central Bank, which offered 1.1 trillion euros at ultra-low rates to eurozone banks in December 2011 and February 2012, it said.
But this was only a "temporary relief," the OECD said, and in the meantime, private investors were withdrawing.
"In the short term, there is a substantial risk that the economy, notably the banks, will remain cut off from external funding," it said.
indiatimes.com
Spain must quickly fix its banks to avert the "substantial risk" of being cut off from external financing and plunging into an even deeper recession, the body warned in a report.
"The economy is undergoing a prolonged recession," the Organisation for Economic Cooperation and Development said in a report, citing the 2008 global financial crisis and the bust of a Spanish housing boom.
"The prospect of an immediate recovery remains remote," the OECD said, noting that people and businesses were struggling to repay debts and the nation was stuck in a debt crisis.
Addressing Spain's 25-per cent unemployment rate, the highest since the return to democracy after the death of General Francisco Franco in 1975, the OECD urged drastic labour market changes.
It called for cutting compensation for unfair dismissal, considering abolishing an extension of industry-wide collective bargaining, and more training and job-search help for the young.
Spain's economy has been shrinking for 15 months, with output slumping 0.3 per cent in the third quarter, official data show, and the recession is expected to last right through 2013.
The OECD is forecasting Spain's gross domestic product will shrink 1.3 per cent in 2012 and decline by another 1.4 per cent in 2013 before a weak pickup of 0.5 per cent in 2014.
Spain's "immediate policy priority" is to restore trust in banks by fixing weak balance sheets, making orderly resolution of non-viable banks, and shifting bad assets into a new bad bank, the body said.
Spain's banks were now faced with high interest rates to find external funding, the OECD said.
As a result, they relied heavily on the European Central Bank, which offered 1.1 trillion euros at ultra-low rates to eurozone banks in December 2011 and February 2012, it said.
But this was only a "temporary relief," the OECD said, and in the meantime, private investors were withdrawing.
"In the short term, there is a substantial risk that the economy, notably the banks, will remain cut off from external funding," it said.
indiatimes.com
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