Rajoy's risky bet on Spanish economic recovery

Sun Jul 14, 2013 4:18pm EDT
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By Julien Toyer

MADRID (Reuters) - Spain's Mariano Rajoy is making a risky political bet in claiming recovery is close at hand as a recent economic upturn is fragile and even if it persists an austerity-weary public may not feel much benefit, analysts and sources say.

For weeks, the government has tried to move away from the gloomy picture it presented in April when it updated its economic strategy, pointing at encouraging trade, labor cost and deficit numbers instead.

Ministers and officials have hammered home the message that the worst of the crisis has passed, the adjustment after a 2008 property crash is close to ending and structural reforms implemented last year will soon deliver growth and jobs.

More recently prime minister Rajoy and his top aides have talked up the prospect of a quicker than expected recovery with growth expected in the third quarter instead of the fourth.

The country has been in or close to recession for the past five years and was forced last year to take a 42-billion-euro ($55 billion) bailout for its banks, brought low when a decade-long property bubble burst.

"Our economy has turned the corner and we are at the start of a change in trends which will allow us, with effort, to create jobs again. The foundations have been laid," Rajoy said at an event last Sunday.

In private, however, senior officials acknowledge the risk of a backlash as people may not see any improvement in their living conditions and job prospects for another two years while many factors may set back recovery.

"The car has been fixed, the driver is in good shape but you never know what may stand in your way. Yes, there is a risk of an accident," said a senior government source on condition of anonymity. "If that happens, we'll see how we deal with it."   Continued...

Spain's Prime Minister Mariano Rajoy gestures during a presentation on social action entities at the Moncloa Palace in Madrid July 11, 2013. REUTERS/Juan Medina