Brussels oversees Spain's deficit cuts (5)

08:54, May 17, 2010      

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FEAR OF A NEW RECESSION

The austerity plan announced by Zapatero had a positive initial impact in the stock markets, but as investors digested its full content, the interpretation of Zapatero's new package became more pessimistic. The market now fears a drastic reduction in public spending amid an early economic recovery. Spain's National Statistics Institute (INE) confirmed this week the official end of the recession, with a minimum GDP increase of 0.1 per cent for the first quarter of 2010, following almost two years of economic contraction.

The Madrid Stock Exchange experienced another week of extreme volatility which began with a record rise and ended with the biggest drop since October 2008. On Monday, the benchmark Ibex-35 reacted triumphantly to the EU's financial protection scheme with an historic surge of 14.43 percent while, on Friday, fears of a return to recession sunk the Spanish index 6.64 percent to 9,314 points. However, the Ibex saw a weekly gain of 3 percent, breaking a four-week run of losses.


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