Bloomberg News

Spanish Exports Slow as Euro Area Returns to Recession

November 21, 2012

Spanish exports grew the least in five months in September as the euro area relapsed into a recession and the region’s fourth-largest economy continued to contract.

Exports rose 0.5 percent from a year earlier, compared with 7.4 percent in August, the Economy Ministry in Madrid said in an e-mailed statement today. The trade deficit narrowed 36 percent to 3.08 billion euros ($3.94 billion).

Prime Minister Mariano Rajoy is counting on exports to make up for shriveling domestic demand in an economy that shrank for a fifth straight quarter between July and September. The government expects economic output to keep contracting next year after five rounds of austerity to tackle the budget deficit.

Rajoy said today that measures to make it easier and cheaper to fire workers are vital to “strengthen confidence,” even if the decision was “controversial.” He said Renault SA is increasing its investment in Spain as a result of government efforts to increase competitiveness.

The labor-law overhaul is “the best proof of the government’s commitment to improve flexibility and competitiveness, and in particular the automobile industry,” he said during a visit to a Renault (RNO) factory in Palencia, in the northeast. Spain wouldn’t attract investment if its “car factories weren’t among the most flexible and competitive in Europe,” he said.

The government said on Sept. 27 it planned to implement within six months a package of measures to further overhaul the economy.

In 2014, Spain will have recovered “practically all” the competitiveness it lost from 1998 to 2008 in terms of unit-labor costs, Bank of Spain Governor Luis Maria Linde said today. Ford Motor Co. (F:US) said last month it’ll close a 48-year-old Belgian factory in the same year and shift part of production to its Spanish site in Valencia as it seeks to cut costs.

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


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