Spanish spending plummets

Spanish retail sales fell a staggering 9.8 percent in April compared to March, the National Statistics Institute reported on Tuesday. It was the biggest monthly drop ever officially recorded in the country.

The retail sales figure for April was down 11.3 percent compared with the same month last year. Spanish statisticians blamed the marked dip in purchases on the economic contraction, drastic government austerity measures and higher taxes which had left consumers with less money in their pockets.

Spain's central bank on Tuesday added to the gloomy business climate by maintaining that Spain would continue to be stuck in recession in the second quarter of this year.

"Available indicators for the second quarter are still scarce, but they do anticipate that activity will continue contracting in this period," the Bank of Spain said in its latest monthly report. The bank echoed an earlier assessment by Economy Minister Luis de Guindos who had already forecast a further decline in business activities.

No outside help needed?

The Spanish government expects gross domestic product (GDP) to shrink by a total of 1.7 percent this year, but forecasts midest growth of 0.2 percent in 2013.

Despite ongoing contraction, coupled with record-high unemployment and gloomy business sentiment, Madrid remains determined to press ahead with a series of austerity packages to rein in spiraling public debt, saying that the priority is to regain investor confidence.

But so far, that intention hasn't come off. Spain on Tuesday continued paying record yields on 10-year sovereign debt bonds, with an interest rate of 6.48 percent basically mirroring the disconcerting situation on markets a day earlier.

Spanish government leaders have been doing everything in their power to calm markets by insisting that no EU rescue funds would be needed to bail out Spanish banks which are in deep trouble because of their alarmingly high level of toxic real estate assets.

hg/mll (AFP, dpa, Reuters)