(30 Jan 2012) Spain's economy contracted by 0.3 percent during the fourth quarter of 2011, according to official figures released on Monday, edging the country closer to a new recession as it grapples with high levels of unemployment and painful austerity cuts.
The figure announced by the National Statistics Institute broke a run of seven quarters without economic contraction. The institute said GDP fell 0.3 percent during the quarter compared with a year earlier. For the autumn of 2011, it increased 0.7 percent.
The economy is expected to slide further through March, placing Spain back in its second recession in less than three years.
"It is very possible that the first quarter of this year also will have a negative increase, which means we will be entering a recession, and this will possibly last for some more quarters of the year," said Juan Jose Torivio, professor of economy at IESE (Institute of Higher Business Studies) business school in Madrid.
A technical recession is defined as two consecutive quarters of contraction.
"The core of economic policy right now are the structural reforms, starting with the labour market reform," Torivio added.
The country, where unemployment has hit a eurozone-high of 22.9 percent, is struggling to avoid slumping further into a debt crisis that has seen Greece, Ireland and Portugal needing financial bailouts.
Spain began in 2010 to emerge from a near two-year recession triggered by the collapse of a real estate bubble that had fuelled growth for nearly a decade and helped make it Europe's top job creator up to 2008.
But the recovery has gone into reverse. The Bank of Spain says the debt crisis has sapped business confidence and dried up bank credits, leading to a huge drop in domestic demand, only partially offset by strong exports.
The bank predicts the economy will contract 1.5 percent this year while the International Monetary Fund says Spain will stay in recession until the end of 2013.
The figures are putting the new right-leaning Popular Party government, which took office last month, under increased pressures to usher in reforms.
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