Tuesday, 12 June 2012

Spain's grinding economic misery will get worse this year despite the country's request for a European financial lifeline of up to €100 billion to save its banks

Spain's grinding economic misery will get worse this year despite the country's request for a European financial lifeline of up to €100 billion to save its banks, Prime Minister Mariano Rajoy said Sunday.

A day after the country conceded it needed outside help following months of denying it would seek assistance, Rajoy said more Spaniards will lose their jobs in a country where one out of every four are already unemployed.

"This year is going to be a bad one," Rajoy said Sunday in his first comments about the rescue since it was announced the previous evening by his economy minister.

Protesters in Madrid hold up signs against the bailout: 'This isn't a rescue, it's a fraud' and 'Hands up, this is a rescue.'  Protesters in Madrid hold up signs against the bailout: 'This isn't a rescue, it's a fraud' and 'Hands up, this is a rescue.'(Paul Hanna/Reuters)

The conservative Prime Minister added that the economy, stuck in its second recession in three years, will still contract the previously predicted 1.7 per cent even with the help. Small businesses and families starving for credit will eventually get relief as the funding props up banks and they increase lending, but Rajoy didn't offer guidance on when.

Spain on Saturday became the fourth, and largest, of the 17 countries that use Europe's common currency to request a bailout. Its economy is the eurozone's fourth largest after Germany, France and Italy.

Across the country, Spaniards reacted with a mixture of anger and relief to the news. The amount of the rescue fund, if all is tapped, amounts to €2,100 of new debt for each person in the nation of 47 million where the average annual salary for those with work is about the same amount and the unemployment rate for those under age 25 is 52 per cent.

The country is already reeling from deep austerity cuts Rajoy has imposed over the last six months that have raised taxes, made it easier to hire and fire workers, and cut deep into cherished government programs including education and national health care.

"It's obviously a shame," said civil servant Luisa Saraguren, 44, as she strolled on a sunny Sunday morning with her young daughter. "But this bailout was fully predictable, and the consequences of this help are going to be a lot bigger compared to the cuts we've been living with already."

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