MADRID: Spain’s Prime Minister Mariano Rajoy on Thursday brushed off any concern of a spillover of the Greek crisis to his country as he revised up economic growth forecasts for the second time this year hours after borrowing costs picked up at a debt auction.
Rajoy said the Spanish economy would expand by 3.3 percent in 2015 and 3 percent in 2016 from a previous 2.9 percent earlier forecast for both years. He also said tax cuts due to enter into force early next year would be brought forward with immediate effect in a bid to return 1.5 billion euros (1.2 billion pounds) to cash-strapped Spaniards ahead of a year-end election.
Although a source close to the government said the new forecast would have been 0.2 percent higher if it had not been for the developments in Greece, Rajoy is also expected to soon reinstate civil service pay and perks that were cut in 2012. With the number of jobless falling for the fifth straight month in June and the government’s tax intake improving by more than 7 percent to the end of May, Rajoy is hoping to use the new leeway for spending to make sure the economic recovery reaches ordinary Spaniards.
Spain’s economy has returned to growth after a long downturn, but high public and private debt and the rising popularity of a political party in the mould of Greece’s Syriza has made some investors more wary about Spanish bonds. Earlier on Thursday, Spain’s 10-year benchmark bond hit its highest auction rate since September, as wariness about Greece’s economic crisis reached other southern European nations. The marginal 10-year yield at the sale, which raised funding over four maturities, was 2.279 percent.
