Grim outlooks for Spain

The eurozone's fourth biggest economy, Spain, was set to contract by 1.5 percent this year, the Bank of Spain predicted Tuesday. It is a faster pace of economic decline than in 2012, when the country's gross domestic product shrank by 1.4 percent.

Spain's central bank said a modest rebound was possible in 2014 at the earliest, forecasting a slight output expansion of 0.6 percent for that year.

The Spanish economy was in a complicated situation because of the need to further cut public expenditures as a result of its debt crisis, the central bank said in a report.

Spain's public finances are in disarray as the government is seeking to prevent the collapse of the country's banking sector in the wake of a huge mortgage crisis. Spain's budget deficit stood at 6.7 percent in 2012 and, according to the Bank of Spain, was expected to come in at 6 percent this year and 5.9 percent in 2014.

Meanwhile, Spain's international lenders from the EU, the International Monetary Fund and the European Central Bank have been forced to recognize that the country won't reach the target of 2.8 percent they set for 2014.

Spain's growth problem is worsened by record unemployment, which the central bank said was expected to rise from 26 percent at the end of 2012 to 27 percent in 2013. Not earlier than in 2014, the bank said, would the eurozone's highest jobless rate start to fall to what is expected to be 26.8 percent.

uhe/dr (dpa, AP, AFP)