Economy improving, says Spanish premier

September 24th, 2010 - 12:48 pm ICT by IANS  

New York, Sep 24 (IANS/EFE) Prime Minister Jose Luis Rodriguez Zapatero has said that Spain’s housing prices have bottomed out and that the nation’s economy will continue to improve.
“The price of housing has touched bottom and won’t fall any more,” Zapatero told CNBC anchor Maria Bartiromo.

“In fact, over the last two or three months, we’ve seen that (housing prices) not only have not fallen but have even risen in some areas of Spain where people are buying their first home.”

“Prices have stabilised in general and have even been increasing. Demand seems to be ticking up,” said the premier, who was in New York to attend the Millennium Development Goals summit and other gatherings of world leaders.

Zapatero said his government managed to correct an “exaggerated” international market perception on Spain’s sovereign debt, adding that he is optimistic about an upcoming bond placement and that Spanish debt is “safe and profitable” despite a recent downgrading of the country’s credit rating in April.

Asked by Bartiromo how his government managed to “stop the bleeding” and achieve slight growth in the first two quarters after many months of recession dating back to late 2008, Zapatero said one of the first measures he took was to “improve knowledge” about Spain’s financial situation and show investors that Spanish banks are “sufficiently capitalised”.

In that sense, he said stress tests Spanish banks underwent “yielded excellent results”, which was necessary to show “investors, banks and analysts that the situation was much better than they thought”.

Zapatero also pointed to a series of “serious and very hard” measures to slash the budget deficit.

“For example, we reduced public salaries by an average of 5 percent and cut our public investments by 30 percent,” said Zapatero, who also mentioned steps taken to overhaul the country’s labour market and pension system.

Asked about investors’ concerns that austerity measures may be rolled back now that economy has begun growing again, Zapatero said the risk premium for Spanish debt has improved and that has given Spain a “greater margin for increasing public spending, although only slightly”.

“Our estimate is that we won’t have any more quarters where growth will go down. We think that growth will continue to improve, and this will also improve confidence in the Spanish economy, which is something we need,” Zapatero said, adding that his government has made “enormous efforts to improve the level of confidence.”

Even so, he said Spain will remain “very vigilant” with respect to public spending to ensure the deficit falls to 3 percent of Spain’s gross domestic product.

“Right now the plan is going well and we’re not expecting any surprises whatsoever,” Zapatero said.

In Spain, the effects of the global recession were aggravated by the collapse of a long construction and property boom that made the country’s economy the envy of most of Madrid’s partners in the European Union.

–IANS/EFE

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