Spain’s Economy Shrinks amid Bailout talks

Spain’s economy contracted for a fifth quarter, adding pressure on Premier Mariano Rajoy to seek more European aid even as the euro area’s fourth-largest economy met a bill-sales target.

Gross domestic product fell 0.4 percent in the three months through September from the previous quarter, matching the contraction of the second quarter, the Bank of Spain said in an estimate in its monthly bulletin released in Madrid today. That compares with a median forecast for a 0.7 percent contraction in a Bloomberg News survey of 10 economists.

Sain’s bonds have declined since European Union leaders last week failed to discuss further aid for the nation at a Brussels summit. Rajoy has struggled to trim a 2011 budget deficit that was more than three times the EU limit, after the country’s deepening recession pushed the jobless rate over 25 percent, sapping demand and tax revenue.

“Progress isn’t conclusive, there is a huge amount of uncertainty in Spain right now,” said Ebrahim Rhbari, a London- based economist at Citigroup Inc. “There are question marks about the banking sector and public finances and economic fundamentals suggest we will see a bailout sooner than later.”

Spain’s economy probably contracted 1.7 percent in the third quarter from a year ago, as job losses continued, households ate into their savings and low disposable income reduced their ability to pay down debt, the Bank of Spain said.

The euro weakened 0.4 percent against the dollar and was at $1.3008 as of 1:46 p.m. in Brussels. The Stoxx Europe 600 Index dropped for a third day, falling 1.1 percent.

Bloomberg

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