Tuesday, August 28, 2012

Spanish recession set to deepen as austerity bites

(Reuters) - The Spanish economy is falling deeper into recession and depositors are pulling their money out of the banks, figures published on Tuesday showed, as the government moves closer to seeking a European rescue package.

The recession grew stronger in the second quarter of the year and is expected to get worse as austerity measures introduced in response to the euro zone debt crisis cut into demand for goods and services.

A rush by consumers and firms to withdraw their money from Spanish banks intensified in July, with private sector deposits falling almost 5 percent, to 1.509 trillion euros at end-July from 1.583 trillion a month earlier.

Analysts believe it is inevitable that Spain will soon have to call for a European rescue package to help bring its debt costs down as austerity measures designed to slash the public deficit push the economy deeper into recession. Read More