Spain minister laments unemployment

Oct 11, 2013, 3:52 AM EDT
Spain's Finance Minister Luis de Guindos speaks during an interview with The Associated Press at the International Monetary Fund in Washington, Thursday, Oct. 10, 2013.
(AP Photo/Susan Walsh)

WASHINGTON (AP) — Spain is emerging from years of recession but will need to boost growth significantly to "make a real impact" on one of the highest unemployment rates in the European Union, its economy minister says.

Luis de Guindos told The Associated Press in an interview Thursday that he expects third-quarter data on Spain's gross domestic product, set to be released around the end of the month, to be slightly positive after eight straight quarters of contraction and four years of almost continuous recession.

"This is the beginning of the end of this crisis," he said. "Next year, we are going to see an important reduction in the unemployment rate" for the first time since the downturn began in 2008.

But the tepid growth rate of 0.7 percent forecast for all of next year would not be enough to really make a dent in 26.2 percent unemployment — a rate topped only by Greece in the 28-member EU.

"In Spain, we have a horrible employment situation. The unemployment rate is totally unacceptable," he said, especially youth unemployment.

Asked when the rate might fall below 25 or 20 percent, de Guindos did not reply directly but said the "evolution of employment" is more important than the rate.

"Growth has to be enhanced in order to make a real impact on the employment dynamics of the labor market in Spain," he said on the sidelines of the International Monetary Fund/World Bank meetings in Washington.

"The government is fully convinced additional measure have to be taken."

He said Spain was "perfectly on track" to meet its budget deficit target of 6.5 percent of GDP this year and expected to meet a 5.8 percent target for 2014.

After waves of unpopular tax hikes and spending cuts to cherished government programs such as national health care and public education, no further measures would be needed this year, he said.

"We rule out any spending cuts because we are on track" to meet the deficit target, he said, adding that authorities are not considering slowing the pace of deficit reduction.

The IMF said this week that Spain and France could afford to ease up on austerity measures because they have made progress in cutting budget deficits.

As Europe is on the cusp of emerging from a deep economic crisis, de Guindos said he sees some bright spots.

"There is a rebalancing of competitiveness in the eurozone. The southern European peripheral countries have started to gain competitiveness vis-a-vis the central or core countries of the eurozone," he said, referring to the 17 countries that use the euro currency.

He said many are watching Ireland's recovery to assess whether the austere economic policies guided by international lenders have been a success. Ireland's crisis began before Spain's.

Turning to the problems just a few blocks away in the U.S. Capitol, the minister said he hopes the U.S. will soon resolve the political impasse over raising the debt ceiling. The deadlock has sent jitters around the world, where many worry that failure to raise the debt ceiling could cause a U.S. debt default with repercussions abroad that could derail the fragile global economic recovery.

"It is a source of uncertainty now while we are not short of sources of uncertainty in the global economy," he said. "So I think that we should try to close the issue as soon as possible."