SPAIN is expected to go back into recession again.

It comes after the new finance minister Luis de Guindos warned that the fragile economy was expected to show a 0.3 per cent contraction for the last quarter of 2011.

If this happens again for the first quarter of 2012, Spain will officially have slipped back into recession – barely two years after climbing out of its last economic downturn.

Guindos insisted the new PP government was committed to curbing the budget deficit by €16.5bn in 2012 through sweeping cuts.

He said: “This quarter the Spanish economy will surely see a downturn and we will return to negative growth.

“Let nobody be fooled, the next two quarters are not going to be easy either in terms of growth or employment.”

Spain is trying to reassure markets that it can curb its deficit to avoid being punished by investors anxious about the future of the 17 nation European single currency.

Just before Christmas, the yield on 10-year bonds – which reflects the real cost of borrowing for governments – increased two basis points to 5.41 per cent.

The government has set a January 7 deadline for employers and unions to come up with a labour reform programme.

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