Spain says slump in 2012 not as bad as feared

Spain's economic slump in 2012 will not be as bad as the government had been forecasting, Economy Minister Luis de Guindos said Monday. The decline in gross domestic product will be "less bad" than earlier thought, shrinking by about 1.3 or 1.4 percent this year, he told public radio RNE. The government has forecast a 2012 contraction of 1.5 percent. De Guindos conceded, however, that the final quarter of the year will be "the hardest, it will be the most difficult". The Bank of Spain has already said the recession is expected to hold its grip on Spain in the last quarter. The government is forecasting a 0.5-percent economic contraction next year, too, far more optimistic than most other analysts whose forecasts are centred on a 1.5-percent economic decline. In the third quarter of 2012, Spain's gross domestic product shrank by 0.3 percent from the previous quarter and by 1.6 percent over the year, according to official data. "Spain is laying the groundwork for recovery, which will come in the following quarters," De Guindos said. Spain's borrowing costs remain high despite falling since the European Central Bank in September outlined plans to buy the bonds of member states that submit to strict bailout conditions. Nevertheless, Spanish interest rates remain high, with 10-year government bonds hovering above 5.6 percent in late morning trade. Prime Minister Mariano Rajoy's has yet to decide whether to apply for a bailout. De Guindos eurozone said action to show the single currency is irreversible -- for example by making progress towards creating a single banking supervisor -- would be more important than any bailout. "The help Spain needs is that doubts on the eurozone be dispelled," the minister said. "The IMF has said that if those doubts disappeared, our financing situation would be much better," he added.