MADRID (MarketWatch) — Spain’s economy is back in recession after a mild recovery in early and mid-2011, and faces an “exceptional” situation that may led to further increases in unemployment, Bank of Spain Governor Miguel Angel Fernandez Ordonez said Tuesday.
The euro zone’s fourth-largest economy is also conducting what Fernandez Ordonez called an “unprecedented” fiscal adjustment–seeking to lower its budget deficit from 8.5% of gross domestic product last year to 5.3% of GDP this year–in an address to a parliamentary committee.
Fernandez Ordonez also defended the European Central Bank’s move to provide ample bank liquidity via auctions conducted in December and February. He added that, despite the misgivings of critics, the fresh liquidity inflow hasn’t slowed down the progress of Spain’s reform drive.
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