Luis de Guindos, the new Spain finance minister, expects a recession in the nation. GDP will fall .2% in the current quarter and .3% in Q1 of next year, according to his calculations.
Spain’s unemployment rate is over 20% and property values continue to fall. There are also concerns that the nation’s banks lack capital to make it through another downturn.
Spain joins several other weak economies in the region which face recessions. At the top of this is Greece.
Concerns have grown that austerity budgets will take away any hope of government stimulus that might drive both consumer activity and business activity as a means to keep nations out of downturns. A drop in GDP will cause deficits to rise further in these nations, as austerity further undermines expansion. And, these rises in deficits may cause even more national budget cuts–a vicious cycle.
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