MADRID, Aug 17 (Reuters) - Spain's unemployment could end the year above the government's 10.4 percent forecast, Economy Minister Pedro Solbes said in remarks published on Sunday, and he warned of widespread government budget cuts next year.
Solbes told news agency EFE in an interview that, 'at the end of the year we could be above that (10.4 percent forecast)'.
Unemployment in Spain hit a 10-year high of 2.43 million people in July, with nearly two of every three layoffs coming from Spain's construction sector where house-building has collapsed after a decade-long boom and has sucked the economy into its worst crisis since 1993.
Despite the sharp economic slowdown, Spain's Socialist government has maintained social spending programmes.
However, Solbes warned of government belt-tightening next year after Spain posted a budget deficit in the first half -- the first time in three years it has fallen into the red.
'Most of the (budget) items will be smaller,' he said, comparing next year to a budget of 349 billion euros ($520.3 billion) in 2008.
Solbes also reaffirmed his belief that quarterly growth from July to September would be 'somewhat better' than in the second quarter when quarter-on-quarter growth slowed to 0.1 percent.
This would be thanks to a lower oil price, a good harvest and tax credits including the return of 400 euros to all income tax payers, he said.
Solbes acknowledged that the Spanish economy was 'within a whisker' of recession but said it would avoid contraction.
'When I look at peoples' behaviour this summer it is true that there isn't the happiness of previous years, but neither is there a sensation of paralysis,' Solbes told EFE.
Solbes does not expect a recovery until late next year and economists fear years of stagnation.
The economy minister also renewed his call for greater wage restraint in the face of inflation which touched a 15-year-high of 5.3 percent in July.
(Reporting by Ben Harding; editing by Rory Channing) ($1=.6707 Euro) Keywords: SPAIN ECONOMY/SOLBES tf.TFN-Europe_newsdesk@thomson.com hjp COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
Solbes told news agency EFE in an interview that, 'at the end of the year we could be above that (10.4 percent forecast)'.
Unemployment in Spain hit a 10-year high of 2.43 million people in July, with nearly two of every three layoffs coming from Spain's construction sector where house-building has collapsed after a decade-long boom and has sucked the economy into its worst crisis since 1993.
Despite the sharp economic slowdown, Spain's Socialist government has maintained social spending programmes.
However, Solbes warned of government belt-tightening next year after Spain posted a budget deficit in the first half -- the first time in three years it has fallen into the red.
'Most of the (budget) items will be smaller,' he said, comparing next year to a budget of 349 billion euros ($520.3 billion) in 2008.
Solbes also reaffirmed his belief that quarterly growth from July to September would be 'somewhat better' than in the second quarter when quarter-on-quarter growth slowed to 0.1 percent.
This would be thanks to a lower oil price, a good harvest and tax credits including the return of 400 euros to all income tax payers, he said.
Solbes acknowledged that the Spanish economy was 'within a whisker' of recession but said it would avoid contraction.
'When I look at peoples' behaviour this summer it is true that there isn't the happiness of previous years, but neither is there a sensation of paralysis,' Solbes told EFE.
Solbes does not expect a recovery until late next year and economists fear years of stagnation.
The economy minister also renewed his call for greater wage restraint in the face of inflation which touched a 15-year-high of 5.3 percent in July.
(Reporting by Ben Harding; editing by Rory Channing) ($1=.6707 Euro) Keywords: SPAIN ECONOMY/SOLBES tf.TFN-Europe_newsdesk@thomson.com hjp COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.