Financial woes in Spain set to get even worse

SPAIN’S grinding economic misery will get worse this year, despite the country’s request for a European financial lifeline of up to €100 billion to save its banks, prime minister Mariano Rajoy said yesterday.

A day after the country conceded it needed outside help following months of denying it would seek assistance, Mr Rajoy said more Spaniards will lose their jobs in a country where one out of every four is already unemployed.

“This year is going to be a bad one,” the Spanish prime minister said in his first comments about the rescue since it was announced on Saturday by his economy minister.

The conservative prime minister added that the economy, stuck in its second recession in three years, will still contract the previously predicted 1.7 per cent even with the help.

Spain on Saturday became the fourth – and largest – of the 17 countries that use Europe’s common currency to request a bailout – a big blow to a nation that a few years ago took pride as the continent’s economic superstar only to see it become the hot spot in the eurozone debt crisis.

Its economy is the eurozone’s fourth largest after Germany, France and Italy.

Although Spain has not yet said how much money it would seek, the eurogroup – finance ministers of the 17-country eurozone, of which Spain is a member – said in a statement on Saturday that it was prepared to lend up to €100bn.

The funds will be sent to the Spanish government’s Fund for Orderly Bank Restructuring, which would then use the money to strengthen the country’s teetering banks.