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UPDATE 1-Spanish econ minister sees possible 2010 recovery

Published 06/15/2009, 09:19 PM
Updated 06/15/2009, 09:24 PM

(Adds detail from video of interview, background)

LONDON, June 15 (Reuters) - Spanish Economy Minister Elena Salgado sees the chance of an economic recovery in 2010 after faint signs in recent weeks that the country's downturn may be bottoming out, she said in an interview published late Monday.

"In recent weeks there have been signs of an inflection point, I think at a global level and also in Spain -- very weak signs, but they are there," she said in a video on the Financial Times's website.

"Recovery is not here, but it could be next year," she continued.

Last week Salgado said that she expected the economy to shrink by 3.6 percent this year and a further 0.3 percent in 2010 due to the end of the house-building that fuelled Spain's pre-credit crunch boom.

Salgado said that Spain's fiscal position was not worrying, with overall debt-to-GDP levels 20 percentage points lower than the euro zone average, and that tax rises would be premature.

"Our consumption is now very low, so we have to think before increasing taxes. We have to think twice. At the moment, what we foresee for the next future is that we are going to reduce this fiscal stimulus in some temporary measures," she said.

"We are going to retire this fiscal stimulus as soon as our growth is at normal figures ... perhaps 1.5 or 2 percent," the FT quoted her as saying.

Spain is spending billions of pounds on state construction projects to fill some of the shortfall in private demand, and is set to run a budget deficit equivalent to around 9.5 percent of GDP this year despite nudging up fuel and tobacco taxes.

Salgado, who took over from previous economy minister Pedro Solbes in April, has promised to bring Spain's budget deficit below the 3 percent European Union threshold by 2012. (Reporting by David Milliken; Editing by Gary Hill)

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