MADRID (AP) -- A record drop in retail sales added to Spain's woes Tuesday as the country struggles to contain the crisis crippling its banking industry and investors remained wary of the country's ability to manage its debt.
Retail sales dropped 9.8 percent in April in year-on-year on a seasonally-adjusted basis as the country battles against its second recession in three years and a 24.4 percent jobless rate that is expected to rise. The fall in sales was the 22nd straight monthly decline, and was more than double the 3.8 percent fall posted in March, the National Statistics Institute said Tuesday.
A gloomy Bank of Spain report heaped more bad news on the government. The central bank said in its monthly economic analysis it anticipates the economy will keep shrinking at least until the end of June, after contracting 0.3 percent in the first quarter. The government has predicted a 1.7 percent contraction in 2012.
The conservative government has introduced harsh austerity measures — including spending cuts on health and education — in attempt to control the level of its debt relative to the sign of its economy. It is also trying to reassure investors worried that the woes of the banking sector — heavily exposed to an imploded real estate bubble — will drag the country into a bailout like Greece, Ireland and Portugal needed.
Late last week Bankia, the nationalized lender and Spain's fourth-largest bank, announced that it would need a further €19 billion ($23.88 billion) in state aid to shore up its defenses against losses from its toxic loans. News of the bailout, and concerns over how the government would raise the money, sent Spain's main IBEX 35 stock index down to nine-year lows Monday and the borrowing costs up to dangerously high levels.
In an attempt to calm concerns, Prime Minister Mariano Rajoy gave an impromptu press conference Monday, insisting yet again that Spain's banking sector would not need a bailout.
The interest rate, or yield, on Spanish 10-year-bonds rose Tuesday to 6.5 percent — a sign that investors are turning away even from Spanish debt. Meanwhile the spread between Spanish bonds and safe haven German bunds stayed sky high, at an alarming 514 basis points. Spain's IBEX stock index was down a further 1.8 percent at midday.
Late Monday evening, Bankia's parent company restated its 2011 results to reflect a €3.3 billion ($4.15 billion) loss as opposed to a €41 million profit.
BFA, or Banco Financiero y de Ahorros, said in a statement that about half of this revised amount stemmed from losses at Bankia with another €1.6 billion in losses from an adjustment of expected tax deductions, which the company had previously recorded as assets. It said the profit recalculation was prompted by the nationalization.
Bankia's exposure to toxic real estate assets is now calculated at about €40 billion, as opposed to the most recent total of €32 billion.
- Bank of Spain