Spain minister plays down IMF report

CIARAN GILES, Associated Press

MADRID -- Spain's economy minister played down the International Monetary Fund's forecast that the Spanish economy will contract by 1.3 percent next year _ more than double its previous predictions _ saying Tuesday that the forecast is not written in stone.

Speaking in Luxembourg, Luis de Guindos said he respected the IMF's forecast, which is also more than double the Spanish government's prediction, just like any other but added, "We start from the premise that that we don't want such predictions of economic growth to come true."

The IMF had previously predicted Spain's economy _ already in double-dip recession _ would shrink by 0. 6 percent in 2013. The government is banking on a 0.5 percent contraction.

The institution said Spain's economy would contract 1.5 percent this year, a figure that coincides with the government forecast.

Spain, with near 25 percent unemployment, has introduced a series of austerity measure and financial and labor reforms in a desperate bid to bring down its deficit and convince investors it can manage its finance without outside help.

Spain has already been granted a (EURO)100 billion loan by the Eurozone group of nations to help those of its bank worst hit by the collapse of the country's bloated real estate sector with the onset of the crisis in 2008.

It is now pushing for the European Central Bank to intervene in the secondary market and bring down its borrowing costs but the ECB insists the country must formally apply for aid first.

Besides its troubled banks, many of Spain's regional government are also in bad financial straits and in need of help.

Among them, is the powerful northeastern region of Catalonia whose government and Parliament have resurrected long-dormant demands for secession from Spain and vow they will hold a referendum on self-determination.

Increasingly beleaguered Spanish Prime Minister Mariano Rajoy has vowed to block any separatist moves. On Monday, he described Catalonia's pro-independence demands as "madness of colossal proportions."

His Justice Minister Alberto Ruiz Gallardon went further by warning Catalan business representatives that secession would see Catalonia being expelled from the euro and the rest of Spain being dragged along with it.