Rajoy Abandons Spain Growth Forecast for 2013 as Austerity Bites

Spanish Prime Minister Mariano Rajoy abandoned his forecast for a return to growth next year as the euro area’s fourth-largest economy endures a fourth round of austerity.

Gross domestic product will fall 0.5 percent in 2013 instead of rising 0.2 percent as the government predicted April 27, Budget Minister Cristobal Montoro said after a weekly Cabinet meeting today in Madrid. Unemployment will rise to 24.6 percent in 2012 instead of 24.3 percent, dropping to 24.3 percent in 2013 instead of 24.2 percent, he said.

The economy returned to recession last year, and Spaniards are enduring their fifth year of crisis and surging unemployment after the collapse of the real-estate boom. The nation’s economic outlook is worsening as Rajoy’s government implements 110 billion euros ($135 billion) of measures over three years to cut budgets, raise taxes, shrink public wages and charge more for education and health care to tackle the euro area’s third- largest budget deficit.

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net