Spain reels as high street hits fresh low

 

The sinking Spanish economy was struck a fresh blow yesterday with retail sales figures for April showing a 9.8 per cent year-on-year fall, the biggest since records began in 2003.

Spain's fourth largest lender, Bankia, also suffered another battering on the Spanish stock exchange, with its shares plummeting by 16 per cent, reflecting growing fears about the solvency of the financial sector.

This was the 22nd month in a row that Spanish retail sales have fallen. The public are battening down their hatches as the centre-right government seeks to impose the most brutal round of austerity seen in Spain since the Franco era. Prime Minister Mariano Rajoy, under orders from the European Commission, is looking to reduce Spain's budget deficit from 8.9 per cent of GDP to 5.3 per cent by the end of this year.

The economy has already succumbed to recession and the OECD last week forecast that it will sink 1.6 per cent over the course of 2012. Nationwide unemployment has reached 24 per cent and some 50 per cent of young people are jobless.

But an even more immediate crisis is the state of its financial sector, which is groaning under an estimated €100bn (£80bn) in bad loans made to the country's collapsed real estate industry. An independent audit of the sector is under way and will report next month on how much extra capital the banks need to stay afloat. But many analysts wonder if Spain has the resources to rescue its lenders.

The government announced last week that it would be ploughing a further €19bn of public money in to its weakest major lender, Bankia. Yet on Monday, it emerged that Madrid is planning to do so by issuing the bank with Spanish government bonds, rather than cash. While this would keep Bankia going for a while, since it could swap these bonds for euros at the European Central Bank, it would increase Spain's debt pile.

Many investors think Spain will soon be forced to apply for a bailout from the eurozone rescue fund. But this is something it has been resisting since a bailout would entail the same kind of intrusive external supervision seen in Greece, Portugal and Ireland. Madrid would prefer to maintain some of its autonomy by negotiating a direct bailout of its banks by the European authorities. Investors, however, are dumping Spanish sovereign debt in anticipation of a bailout that they fear may leave them at risk of a "haircut", as seen in Greece.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Life and Style
The original ZX Spectrum was simple to plug into your TV and get playing on
techThirty years on, the ZX Spectrum is back, after a fashion
Sport
football
News
news
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Senior Digital Marketing Consultant

£28000 - £45000 per annum: Recruitment Genius: A Senior Digital Marketing Cons...

Recruitment Genius: Assistant Stores Keeper

£16640 - £18500 per annum: Recruitment Genius: An Assistant Stores Keeper is r...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Software Developer - C# / ASP.NET / SQL

£17000 - £30000 per annum: Recruitment Genius: Developer required to join a bu...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk