Spain’s recession eases in second quarter

Spain's recession eased in the second quarter, official data showed on Tuesday, as booming exports helped to offset weak domestic demand in the eurozone's fourth-biggest economy.

Spain's recession eases in second quarter
Spain's gross domestic product shrank by 0.5 percent in the second quarter of 2013 — its eighth straight quarterly decline. Photo: Michael Allen Smith

Gross domestic product shrank by 0.5 percent — its eighth straight quarterly decline.

This came after a 0.5-percent drop in the first quarter and a decline of 0.8 percent in the final quarter of 2012, the National Statistics Institute said.

On an annual basis the economy contracted by 1.7 percent following a 2.0 percent decline in the first three months of the year, the institute said in a preliminary report.

"This result was basically caused by a more negative contribution in the domestic demand, which was compensated partially by a positive contribution of the external demand," it said.

Prime Minister Mariano Rajoy is relying on growing exports and an upsurge in tourism to end an economic slump that started in 2008 after the end of a decade-long property boom.

Earlier this month the government reported that Spain's trade deficit narrowed sharply to just €27.5 million ($36 million) in May largely due to booming exports.

Rajoy's conservative government has made reforms, such as changes to labour market rules, that have reduced labour costs and help make Spanish goods more competitive.

The unemployment rate fell for the first time for two years in the second quarter, to 26.26 percent from a record 27.16 percent in the first quarter, the statistics office reported last week.

Seasonal tourism accounted for most of the drop as the sector is expected to be strong this year as cash-strapped Europeans look for budget vacations while avoiding Egypt and other rival destinations in the Middle East and North Africa experience political turmoil.

The statistics agency also reported provisional data showing that inflation slowed in July to 1.9 percent after rising for two months to 2.2 percent and 1.8 percent in May.

While the government has hailed the improvements in economic indicators, it has offered little hope of a solid recovery, forecasting a contraction of 1.3 percent in 2013 and only a feeble 0.5 percent rebound in 2014.

A property market crash in 2008 plunged Spain into a recession, destroyed millions of jobs and left banks awash in bad loans.

The economy emerged gingerly from that downturn in 2010 before sliding back into recession in mid-2011.

The institute will publish its final figures for the second quarter GDP on August 29.

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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.


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


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