“España está cayendo de su pedestal” [ .. ] “Zapatero ganó hace días las elecciones; pero sus problemas económicos apenas están comenzando” [ .. ] “Como esperado, la crisis se anuncia más dura y penosa” [ .. ] “Las cosas han empeorado desde el 9 de marzo” [ .. ] “Paro, inflación sin crecimiento”.

[ .. ]

“Lo peor, comienza a esfumarse el superávit” [ .. ] “Zapatero tiene suerte: el PP está inmerso que disputas internas. Mariano Rajoy, que ha perdido dos elecciones consecutivas, tendrá que hacer frente al desafío de Esperanza Aguirre en el congreso de junio” [ .. ]

Economist, 18 abril 08:

The Spanish prime minister has recently won re-election, but his economic problems are just starting. [ .. ] The higher they climb, the harder they fall. Spain, one of Europe’s economic star performers for more than a decade, is tumbling from its pedestal just as José Luis Rodríguez Zapatero, the Socialist prime minister, begins his second term.
Mr Zapatero has burnished his credentials as a social reformer, with a fresh cabinet dominated by women, including the new defence minister, Carme Chancón. But the need for economic reforms is becoming ever more urgent.

The global credit crunch has come with an extra twist in Spain, where it coincides with the bursting of the housing bubble. An expected soft landing has suddenly become hard and painful. Underlying (and untended) economic weaknesses that were hidden by the construction boom are being painfully exposed, among them low productivity growth.
Things have become considerably worse since the March 9th elections. The IMF estimates that last year’s growth of 3.8% will fall to 1.8% this year, and get worse in 2009. These would be the slowest growth levels in Spain since 1993.

House prices are predicted to fall by up to 15% over three years. Negative equity threatens some home-owners. But as a member of the euro zone, Spain has no control over interest rates or the value of the currency. [ .. ]

The most worrying factor, however, is the disappearing budget surplus. [ .. ]

Fiscal expansion may not be enough, however. A strengthening euro will hinder export-led growth. Productivity and competitiveness remain Spain’s greatest challenges. These need reforms to the labour market, the education system and Spain’s research and development infrastructure that may take years to produce results.

Mr Zapatero is lucky, for the moment at least. The opposition People’s Party is immersed in internal squabbling, and is waiting to see whether its leader, Mariano Rajoy, who has lost two consecutive elections, will face a challenge from Madrid’s ambitious regional premier, Esperanza Aguirre, at its convention in June.

Mr Zapatero claims the downturn is temporary and promises that Spain will soon return to high growth. That will be a taller order than he may imagine. [Economist, 8 abril 08. Spanish economy. In a slump].

La stagflaction está ahí.

Financial Times, 18 abril 08:

Spain’s big businesses warned yesterday that the economy was sinking rapidly into stagflation, a period of little or no growth with high inflation [ .. ] [Financial Times, Spain warned on stagflation threat].

• Economía en este Infierno.