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UPDATE 1-Spain cenbank sees gradual upturn for economy

Published 04/05/2011, 05:15 AM
Updated 04/05/2011, 05:20 AM
ANGL
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* 2011 seen tough, stronger recovery in H2 2012 - cbank head

* Says international investor view of Spain improved

* Says country must press on with reforms

(Adds details, quotes)

By Nigel Davies

MADRID, April 5 (Reuters) - Investors are perceiving Spain in a more positive light and its economy is moving in the right direction, but a full recovery will not happen until the second half of 2012, the governor of the Bank of Spain said on Tuesday.

"We are on the right track to emerge well and even to emerge stronger from the difficult situation that our economy and banking system has (experienced)," Miguel Angel Fernandez Ordonez told a conference in Madrid.

He predicted a difficult 2011 and a stronger recovery in the second half of 2012.

Spain has been a focus among international investors concerned it might need a bailout, though an austerity drive has help calmed those fears to a large extent.

Ordonez said he anticipated few problems due to contagion from the fiscal crisis in neighbouring Portugal, which many market players do expect will need rescuing like fellow euro zone members Ireland and Greece. "It's still too early for vigorous (Spanish) growth to be re-established. More effort will be needed to digest the excesses associated with the property boom and it will take time for net job creation to gather strength," Ordonez added.

Spain's economy is expected to grow tepidly in each quarter this year and the country may be forced to take additional deficit-cutting measures should growth not reach a government estimate of 1.3 percent for the year as a whole.

Ordonez added in a speech that the central bank would continue to force banks to provision against bad assets.

Ongoing financial sector reform had helped narrow the spread between the country's sovereign debt and German debt to 190 basis points, he added.

(Reporting by Nigel Davies; writing by Elisabeth O'Leary; Editing by John Stonestreet) elizabeth.oleary@reuters.com; +34 91 585 8295; Reuters Messaging: elizabeth.oleary.reuters.com@reuters.net

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