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Business

Spanish economy takes deepest dive in years

Spain's economy has taken a quarterly tumble at a rate not seen in over three years. Figures showed demand sinking sharply in the country, as austerity measures have left people with less to spend.

The Spanish economy plunged by 0.6 percent in the final quarter of last year, a fresh Bank of Spain report showed on Wednesday. Gross domestic product in the country thus took its steepest quarterly dive in more than three years.

"Spain's economic output has been on a downward path since the final quarter of 2011," the central bank said "Available data indicate that this trend intensified in the October-December period."

The report revealed that demand by consumers and businesses dropped by 1.9 percent in the fourth quarter of 2012, as a series of austerity measures continued to bite.

Few growth incentives

The final quarter was preceded by a shopping spree ahead of a September 1 increase in sales tax. And to compound the sluggish demand towards the end of last year, many Spanish workers suffered from the cancellation of Christmas bonuses.

A generally weak labor market with one in four people out of work in the country also contributed to the marked contraction. The Bank of Spain estimated that economic output throughout 2012 fell by 1.3 percent, compared with 1.5 percent forecast by the government.

The European Commission warned that Spain would miss its budget deficit target of 6.3 percent of gross domestic product for 2012; Madrid is reckoning with a figure of 7-percent. Back in 2011, the deficit still stood at 9.4 percent.

hg/msh (AFP, dpa)