Spain exports a cushion, no springboard for growth

Thu Aug 16, 2012 12:00pm EDT
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By Paul Day and Amanda Cooper

MADRID (Reuters) - Spanish goods exports extended a strong run of growth in June, but a reliance on European buyers and the slow pace of structural reform mean policymakers' hopes that a rapidly improving trade balance may rescue the economy look misplaced.

Goods exports hit 18.9 billion euros ($23.2 billion), economy ministry figures showed on Thursday, meaning they rose in five of the first six months of 2012 and, excluding energy trades, outpaced imports by 1.2 billion euros in June.

Spain's exports have held up well since the economy began to shrink in 2008, providing the only positive growth variable in a dismal economic backdrop that has placed the country at the centre of concerns about the euro zone debt crisis.

The government is hoping foreign sales may eventually hold the key to pulling the country out of recession in the face of weak consumer demand worsened by sky-high unemployment and a harsh austerity programme.

But reliance on demand for its products from its European neighbor may become increasingly risky as the debt crisis hits consumers throughout the region and depresses the economy.

"(Spanish) exports have two main problems: competitiveness, which has improved, but more must be done through structural reforms, and a lack of financing," Trade Secretary Jaime Garcia-Legaz told Reuters.

State help for the sector is worth little if the economy itself is not competitive and while its banks, battered by a property market in freefall, refrain from handing out loans, he said.

"It's because of this that the best policy for internationalization is one of structural reforms, such as that of the labor market. Deep down, you're doing more to boost exports than however many euros spent on promotion."   Continued...