Spain's economy to shrink

Spain's struggling economy will contract and unemployment will rise, despite a $125 billion bank bailout, Spain's prime minister said. "This year is going to be a bad one," Mariano Rajoy said at a short news conference Sunday after commentators and political opponents accused him of going into hiding since the rescue was announced by his economy minister Saturday. "Growth is going to be negative by 1.7 percent and unemployment will increase," Rajoy said before flying to Poland to watch Spain draw 1-1 with Italy in the European soccer championship and lamenting he could not also be in Paris to watch Rafael Nadal play in the French Open tennis tournament. Spain -- the fourth, and largest, of the 17 eurozone countries requesting a bailout -- is already in a double-dip recession, with unemployment topping 24 percent. Rajoy, a conservative, blamed the crisis on the previous government of socialist Prime Minister Jose Luis Rodriguez Zapatero. "Last year, the country's public administration spent more than 90 billion euros ($114 billion) than it received," he said. "You can't go on like that." Rajoy critics point out the failing banks have strong ties to Rajoy and the current ruling People's Party. Rajoy credited his party's leadership for paving the way for the bailout's limited scope. "If we hadn't achieved all we have done over the past five months, then perhaps the entire country would have needed [full-fledged international] intervention," he said. His comments followed a wave of global approval, with U.S. Treasury Secretary Tim Geithner, British Foreign Secretary William Hague and International Monetary Fund Managing Director Christine Lagarde hailing Spain's decision to request the loan. The decision to seek aid came less than 24 hours after the IMF issued a 77-page report that found the Spanish banking sector suffering through a crisis "unprecedented in its modern history." Less than two weeks ago, Rajoy insisted Spain didn't need a bailout. Officials said Sunday the bailout, whose loans are expected to be negotiated before the end of the month, would add an estimated 20 percent to Spain's national debt. But interest payments would not be added to the deficit because they are to be paid by the banks, the officials said. "There are no macroeconomic conditions for our country," Rajoy said. "The conditions are on those who receive the loans, and those are the banks." But the new loans will not be condition-free, said Olli Rehn, the EU's top economic official. The European Commission, the European Union's executive body, and other international experts, and not the Spanish government, will decide how much Spain's banks need, Rehn said. Eurozone finance ministers added they would monitor Spain's deficit and reform program carefully, even though Spain is expected to avoid the kind of intrusive inspection of government books that came along with Greek, Portuguese and Irish bailouts. At his news conference, Rajoy said, "The credibility of the euro won, the future of the euro won, the European Union won and the chances that Spain can soon recover a level of lending that will improve investment and job creation also won." El Pais columnist Antoni Gutierrez-Rubi noted Monday Rajoy put Spain last in the list of winners.