PM PACKAGE TO BOOST ECONOMY

Prime Minister Jose Luis Rodriguez Zapatero interrupted his holiday last week to meet with economy minister Pedro Solbes and other Cabinet members to review the country’s economic situation. Afterwards, Sr Zapatero announced a €20bn stimulus plan to tackle the cooling economy. The plan, yet to be finalised, includes a €20million package to help families access mortgage finance. The economic measures approved also include proposals to cut red tape to make Spanish firms more competitive. There will also be reforms in the housing, transport and telecommunications sectors. The core of the 20bn-euro economic stimulus package has been a 400 euros rebate for 16 million workers and retired workers in the hope this would boost consumption. Further measures are designed to help the construction industry by awarding more money to construct subsidised housing. Tough time ahead The PM also admitted that 2008 and 2009 will be tough, with the country’s GDP growth rate slowing sharply. He said Spain should return to GDP growth of about 3% starting in 2010. Last Thursday, the National Statistics Institute announced that the economy expanded by just 0.1% in the second quarter, compared with 0.3% in the first three months of the year. Compared with the second quarter in 2007, the economy had grown by 1.8%, down from the year-on-year growth rate of 2.7% in the first quarter. Last year, the grew by 3.8%. Inflation rate On Wednesday, figures showed prices had risen at their fastest annual rate for 15 years in July, driven by rising food and fuel costs. The annual inflation rate climbed to 5.3% in July, up from 5% in June. Transport costs were 10.6% higher than a year earlier, with food prices up 7% compared with July 2007. The country’s inflation is above the eurozone average of 4.1%, but Economy Minister Pedro Solbes said the rate of inflation could drop to about 4% by the end of the year as oil prices decline.

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