We can expect even bleaker times to come

This is from today’s Telegraph newspaper:

A report by the European Commission predicted that Spain would fall short of meeting its target to reduce its deficit to six per cent of its gross domestic product by the end of year. Instead, it is likely only to reach 6.6 per cent, down from a level of 9.2 per cent in 2010.

“Further corrective action would be required to reach the deficit target this year,” the commission said in a report published yesterday. The forecast came amid fears of contagion from the problems afflicting Italy and Greece. Spain’s borrowing costs had soared on Wednesday but dropped back slightly yesterday with the interest on its 10-year bonds falling from 5.96 per cent to 5.83 per cent.

It means the conservative Popular Party (PP), which polls predict will win a resounding victory at the general election later this month, ousting the seven-year government of Jose Luis Rodriguez Zapatero, will be under greater pressure to deliver austerity measures.

Mariano Rajoy, who is poised to take over as prime minister, faces having to push through the even more stringent and unpopular reforms that are deemed necessary for Spain to avoid seeking any kind of international rescue.

He will inherit a stagnant economy crippled by the highest unemployment rate in the eurozone — at almost 22 per cent Spain has close to five million jobless. “The new government must act quickly on reforms,” warned Prof Xavier Vives, of IESE Business School in Madrid, yesterday. “But, so far, the PP have not said they have a reforming agenda.”