(Reuters) – The Spanish economy is falling deeper into recession and depositors are pulling their money out of the banks, figures published on Tuesday showed, as the government moves closer to seeking a European rescue package.
The recession grew stronger in the second quarter of the year and is expected to get worse as austerity measures introduced in response to theeuro zone debt crisis cut into demand for goods and services.
A rush by consumers and firms to withdraw their money from Spanish banks intensified in July, with private sector deposits falling almost 5 percent, to 1.509 trillion euros at end-July from 1.583 trillion a month earlier.
Analysts believe it is inevitable that Spain will soon have to call for a European rescue package to help bring its debt costs down as austerity measures designed to slash the public deficit push the economy deeper into recession.
Against this background, Prime Minister Mariano Rajoy will meet European Council President Herman Van Rompuy in Madrid later on Tuesday, a week before the European Central Bank discusses new measures to help debt costs in European nations hardest-hit by the crisis. The ECB meeting on September 6 also coincides with a visit by German Chancellor Angela Merkel to the Spanish capital and a key longer-term bond auction.
Reuters has the full article
