SPANISH Prime Minister Mariano Rajoy has warned the country faces tough times ahead, despite eurozone leaders agreeing a €100 billion bailout.
The rescue package was thrashed out by Eurozone leaders on Saturday in an effort to help Spain’s banking sector, which is struggling with billions of euros of debt related to the failed property market.
The markets responded positively following the news and Spanish bond yields dropped below six per cent, but Rajoy warned the recession will continue to bite.
“This year is going to be a bad one, growth is going to be negative by 1.7 per cent and unemployment will increase,” he said.
“Last year, the country’s public administration spent €90 billion more than it received. You can’t go on like that.”
Spain is the largest economy to require a bailout from the EU since the emergence of the single currency, and is the fourth in total.
The exact amount will be decided in the coming days following an audit of the country’s struggling banks, with the money set to be distributed by a specialist government agency.
Economy minister Luis de Guindos denied it was a bailout, claiming ‘this is not a rescue’.
“This is a loan which is given in very favourable conditions, which will be determined in the next few days,” he said.
“But they are very favourable – much more favourable than the market ones.”
Spain is in its second recession in three years, with the economy expected to shrink by 1.7 per cent this year and unemployment at nearly 25 per cent.
European Commission President Jose Manuel Barroso, said: “We are certain that Spain can gradually regain the confidence of investors and market participants.”