Spanish PM Says Economy Will Return to Growth in 2014

Spain's recession-hit economy will return to growth and begin creating jobs again in 2014 if the government keeps up its tough austerity reforms, Prime Minister Mariano Rajoy said Wednesday.

"In 2014, if we are able to maintain the same level of effort, the Spanish economy will grow markedly and begin to create jobs," he said during a meeting of top officials from his center-right Popular Party.

Rajoy predicted that 2013 would "still be difficult, especially during the first half" as Spaniards would not yet see "tangible results from their sacrifices" but he stressed the government had to maintain its deficit-cutting drive.

"Any other policy would be fooling the Spanish people," he said.

Spain is in a double-dip recession not having fully recovered from the collapse of a decade-long property boom in 2008 which has caused the unemployment rate to soar to a record 26 percent.

The Spanish economy, the eurozone's fourth-largest, contracted by 1.4 percent last year, the second worst yearly slump since 1970.

The government had predicted output would contract by 0.5 percent this year and grow by 1.2 percent in 2014 but last month it said it would have to revise its forecast.

The Bank of Spain predicted predicted last week that the Spanish economy will shrink by 1.5 percent this year before posting a "modest rebound" in 2014 with growth of 0.6 percent.

Since coming to power just over a year ago, Rajoy's government has put in place steep spending cuts and tax rises, aimed at saving 150 billion euros ($194 billion) between 2012 and 2014 and slashing the nation's public deficit, which have prompted mass street protests and hurt its popularity.

Last week the country posted a 2012 public deficit of 7.0 percent, up from the 6.7 percent figure for the year it originally announced in February and above the 6.3 percent target it agreed with the EU.

Spain recorded a public deficit of 9.4 percent in 2011.

The government had targeted a public deficit of 4.5 percent for this year and 2.8 percent in 2014 but a government source said Tuesday that Madrid wants Brussels to agree to ease the country's 2013 deficit target to around 6.0 percent.

Spain also wants the European Union to agree to give the country an extra year to bring its deficit to below the bloc's maximum threshold of 3.0 percent of gross domestic product, the source added.