Mr Rajoy said the eurozone's fourth largest economy was "out of
recession but not out of the crisis", and faced a long period of more austerity
before the country could sustain the recovery.
"The task now is to achieve a vigorous recovery that allows us to create
jobs," he told the Wall Street
Journal.
Spain's unemployment rate, at 25pc, is among the highest in the eurozone. The
bloc's official unemployment rate of 12.1pc also masks huge disparities. While
Austria boasts an unemployment rate of just 4.8pc, the jobless rate in
bailed-out Greece is 27.6pc.
The recovery in Germany, Europe's largest economy, has also been fragile.
Data on Tuesday showed business sentiment rose for a fifth consecutive month in
September. The Ifo Institute's business climate index, which is based on a survey of
7,000 firms, rose to 107.7 in September, from 107.6 in August. However, the
reading fell short of the 108.2 expected by economists.
European Central Bank rate-setter Ewald Nowotny said on Tuesday that the bank
had "flexible" tools at its disposal if it needs to take additional measures,
including providing banks with additional central bank money. ECB President Mario Draghi said on Monday that the ECB stood ready to deliver
a fresh injection of cash into Europe's banks. Asked about the possibility of
the central bank giving banks another chance for those loans, known as Long Term
Refinancing Operations (LTRO), Mr Nowotny said: "It is certainly important to
show all that we have in the way of instruments, which are flexible...Pier Carlo Padoan, the OECD's chief economist, said he expected growth in the
17-nation bloc to be negative this year, despite several countries showing signs
of recovery. Mr Padoan said the single currency area, which emerged from its longest
recession in more than 40 years in the second quarter, remained "a considerable
source of risk" to the global recovery, though he added that the systemic risk
from the eurozone's debt crisis had subsided. He added that while countries should continue to implement austerity
policies, automatic stabilisers such as unemployment benefits should be allowed
to kick-in if economies stalled. Mr Padoan also urged policymakers to tackle
high jobless rates. "There is no doubt that policy priority number one in the euro area is
fighting unemployment. Let's not fool ourselves and expect unemployment to come
down in a stable fashion," he said.
Economists expect growth in the eurozone to pick up in the second half of the
year. On Monday, Spanish prime minister Mariano Rajoy said the country would
exit recession - defined as two or more consecutive quarters of negative output
- in the third quarter, following two years of contraction.
Despite the evidence that migrants from the Middle East and Africa are continuing to flee war and poverty in their home countries and will strike out to Europe again in huge numbers this year, European leaders have taken no major new steps to curb the flow. Nor have they agreed on a comprehensive border policy or prepared for another influx that could rival last year’s, when more than a million asylum seekers reached the Continent, many of them headed to Germany. Prime Minister Manuel Valls of France issued a stark warning in an interview broadcast on Friday about the future of a unified Europe, saying the very idea was under threat unless the Continent could protect its borders. Speaking to the BBC at the World Economic Forum in Davos, Switzerland, Mr. Valls said the Continent could not accommodate the enormous numbers of migrants and warned that they could destabilize European societies. “If Europe is not capable of protecting its own borders, it’s the very idea of Europe that will be questioned,” he said. “Europe has forgotten that borders are required.” The Schengen zone, which permits largely unchecked movement across most of the Continent and was described by Mr. Valls as “one of the great European projects,” has been under severe strain as countries have introduced border controls aimed at stemming the flow of migrants.
