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Friday, March 29, 2024

Spain Lowers GDP Estimate, Raises Unemployment Forecast As Coffee Finally Being Smelled

Courtesy of Tyler Durden

With Greece now a distant, proforma bankrupt memory, rubberneckers have finally started paying far more attention to the Spanish slow motion trainwreck. And things in the Pyrenean country are deteriorating: earlier, Market News reported that the market’s reaction to Spain’s austerity package was one of ridicule, and its credibility will be further eroded now that Spanish bilateral labor reform talks have ended unsuccessfully, leading the way for general strikes as early as next week. Pouring even more gas into the fire is the just released announcement by the Spanish government that earlier economic forecasts were too optimistic: a hallmark of any floundering Keynesian state (and all of this even without the ongoing liquidity crisis as seen by rumors about BBVA’s CP access and the ongoing flash merger rage among all the insolvent savings banks). The government, which is currently saddled with 20% unemployment, said that the economy will grow by 2.5 percent in 2012, down from its previous forecast of 2.9%. GDP growth in 2013 is seen at 2.7%, down from 3.1% previously. And while a realistic unemployment picture courtesy of austerity is now in the upper 20% range, a step in the right direction was the revision to the unemployment forecast, which was pushed higher to 18.9 percent in 2011, up from the 18.4 percent previously seen.

On the other hand, all of this is irrelevant: as now monetary union has ever had to operate in an environment where currency devaluation is at least formally frowned upon, and in which every country was contracting its GDP via austerity and other general strike measures, the final outcome in 2011 will likely be far, far worse, not only for Spain but all of Europe. As usual, the only relevant question is when will European leaders finally realize the euro is unviable, a return to native, devaluationable currencies is critical, and pull the plug on the union.

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