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RECESSION

‘Exports surge to end recession’: Central bank

The crisis hit Spanish economy remained in recession in the second quarter but seemed close to a recovery thanks to exports, the Bank of Spain said on Tuesday.

'Exports surge to end recession': Central bank
Exports have been a rare bright spot for the Spanish economy. Photo: Antonio Tajuelo

"According to available data, that is still incomplete, we estimate GDP fell by 0.1 percent on a quarterly basis, a yearly drop of 1.8 percent," the central bank said in a statement.

But the Bank said the contraction had slowed considerably, eased by a boost in demand for Spanish exports which had made a 0.4-percent contribution to the country's gross domestic product during the quarter.

Spain, the eurozone's fourth-biggest economy, has been sunk in recession since mid-2011 and officially contracted by another 0.5 percent in the first quarter this year.

But the Spanish government has repeatedly signalled in the past month that the economy is about to get back on track on the wave of resurging exports.

Last week the government said Spain's trade deficit narrowed sharply in May.

Exports have been a rare bright spot for the Spanish economy which is struggling to recover from a 2008 property crash that has pushed the jobless rate up to a record 27 percent.

But Ben May, economist at London-based Capital Economics, said the economic situation was still fragile and it was too soon to say that the country is on the cusp of a recovery.

"We expect weak demand in Spain's major export destinations to mean that the boost from the external sector will fade over the coming quarters," he wrote in a research note.

"And with the fiscal squeeze, housing slump and private sector deleveraging set to continue for some time to come, domestic demand is likely to contract significantly further."

Capital Economics nonetheless revised its GDP forecasts for Spain higher on Tuesday.

It now sees the economy shrinking by around 1.7 percent this year, compared to a previous forecast of a 2.0 percent fall, and by as much as 1.5 percent in 2014.

The growth data came as Spain paid sharply lower rates to raise €3.52 billion ($4.63 billion) in three and nine month debt on Tuesday.

The average yield on three-month bills fell to 0.442 percent from 0.869 percent at the last auction in June while the yield on nine-month bills fell to 1.152 percent from 1.441 percent.

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EXPORTS

Trump puts squeeze on Spanish olive oil producers

Farmers had just begun harvesting olives in southern Spain when US President Donald Trump soured the mood with the announcement that Washington would slap hefty tariffs on their produce

Trump puts squeeze on Spanish olive oil producers
Photos: AFP

“We are really worried,” said Carlos Carreira at his 130 hectare (320 acre) olive grove near the town of Antequera in the southern region of Andalusia.    

Spain is the world's biggest producer of olive oil, and the bulk of it comes from Andalusia, whose hills and plains are dotted with olive trees with their distinctive gnarled trunks.

“Already last year prices were sometimes so low that they did not cover production costs. If we add to this a sharp rise in the price of our products in the United States, many farms may end up not being viable,” Carreira added.

Several thousand olive growers, many waving olive branches marched through Madrid on Thursday to protest plunging prices and demand protection from a 25 percent tax which the US is planning to impose from October 18th.

The fresh tariffs announced October 2nd target some EU agricultural and industrial products  — including Spanish olives and olive oil — worth $7.5 billion (€6.8 billion).

The tariffs are in retaliation for subsidies given by Brussels to aircraft maker Airbus.

Olives and olive oil are Spain's main agricultural exports to the United States. It exported €405 million worth of olive oil, and €179 million worth of olives, to the country last year.

At Carreira's farm, a dozen day labourers used machines to shake the olive trees, causing the fruit to fall onto long nets.   

Still bright green, they will be sold as table olives. Olive oil production will begin a few weeks later when riper olives will be collected.

'Tripped'

But some of this “liquid gold”, which sustains entire villages, risks going unsold this year because of the tariffs.

Dcoop, the cooperative which Carreira belongs to and whose headquarters sit at the entrance to Antequera, exports nearly 15 percent of its output to the US, around 35,000 tonnes a year.

The cooperative, which groups 75,000 farmers, is a heavyweight in the sector. In some years it produces more olive oil than all of Italy.   

Dcoop views the US market as a growth area, estimating olive oil consumption there could double in less than a decade.   

It invested $80 million in the US, mostly in two bottling plants in Baltimore and Los Angeles.

“All of a sudden, the market we believed in and tried to grow imposes these tariffs on us. It's like we are being tripped in the middle of a race,” said Dcoop president Antonio Luque.

He said the injustice is all the greater since Spain's main European competitors like Italy, Greece and Portugal have been spared tariffs on their olives, and will certainly use this advantage to boost their market share in
the US.

Job cuts

The cooperative will probably have to slash its workforce by 10 percent at its main bottling plant in Andalusia.

These jobs could reappear in the US since the Trump administration has exempted bulk olive oil from the tariffs, meaning that Spanish firms could get around the levy by bottling their oil on the other side of the Atlantic.

Dcoop has not ruled out expanding its US plants, even if it would be “bad for jobs in Spain”, Luque said.

Olive farmers in Andalusia are still reeling from heavy tariffs slapped by the US on black table olives in response to complaints from Californian producers who argued their Spanish rivals had an unfair advantage because of the European Union's lavish farm subsidy scheme.   

Exports of black olives from Spain to the US fell by 50 percent.   

Spanish farmers accuse Spain's Socialist government of doing nothing to protect them.

Luque warned that support for the EU could decline as a result of the differing tariff advantages.   

“Why stay in the European Union if things are like that in the future? All this could do so much more harm, socially, than people imagine,” he said.

By AFP's Emmanuelle Michel

 

READ MORE: Cava, queso, olive oil and mariscos: Trump slaps extra tariffs on Spanish produce

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