Spain's economic outlook

from today's Business Week Europe Insider news (10/23):

The Economic Outlook for Spain: Bleak
The collapse in housing and construction has combined with the global financial crisis to create one of Spain's worst periods in decades
By Manuel Baigorri
October 16, 2008, 11:36AM EST

"When Romanian-born Ion Lacureanu migrated to Spain five years ago, he found himself in one the fastest-growing countries in the European Union. Spain's booming job market and average annual economic growth of 3% were the envy of the region. Soon the 38-year-old Lacureanu was flourishing as a self-employed construction worker in Valladolid, a city of 320,000. He earned €2,200 ($2,975) a month and had so much work he had to hire other workers to help him out." ...

"Spain's decade-long construction boom began to run out of steam last year (BusinessWeek, 12/3/07), and now the global financial crisis is drying up the international funding that financed the country's huge infrastructure investments. Antonio Argandoña, professor of economics at Barcelona's IESE business school, says the construction industry, which spurred gross domestic product growth in the last decade, is going to stall for the next five to seven years. That in turn will spark unemployment and drag down investment and consumer spending.

Loss of EU Subsidies
Making matters worse, the European Union also has cut back on its financial support for Spain, since the EU now has to shift subsidies to newer members in Eastern Europe. "We are in danger of a general economic collapse," says Argandoña. "We'll see negative growth within this year…This is a long and deep crisis." During the second quarter of 2008, Spain's GDP increased just 1.8% from the same period a year earlier, the lowest growth rate in more than a decade. The International Monetary Fund now forecasts GDP growth this year of just 1.4%, and a 2% decline in 2009." ...

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