Again, the prospect of recession

In his first public statement the new economy minister, Luis de Guindos, carefully avoided the use of the term recession to describe the Spanish economy's soon-to-be-confirmed contraction at the end of this year and, at least, during the first quarter of the next. The prudence shown by the minister on the occasion of the changeover in the higher posts of his department led him to delve rather deeply into his repertory of euphemisms, thus keeping his distance from Prime Minister Rajoy's pledge to "call a spade a spade" at the beginning of his investiture speech last week.

Charting a course between prudence and denial of reality is at times a tenuous game. In this case there was no need for exaggerated caution. As with others in the euro zone, the growth rate of the Spanish economy will be in negative figures at least during two consecutive quarters.

There is no economic analyst, in Spain or elsewhere, who does not anticipate that in the last quarter of this year the Spanish economy will register a negative score. If, as seems equally predictable to most of the people who prepare these analyses, the same happens in the first quarter of the year, then we are looking at a perfectly defined recession in the technical sense.

This will mean that, in the best of cases, the economy will not grow over the whole of next year. Respectable institutions are not wanting, which anticipate that growth throughout all of 2012 will be negative in the whole euro zone - and, of course, in those economies which have most pronouncedly implemented pro-cyclical actions: the shrinkage of public activity at the same time as setbacks to private activity.

While the consequences of the turnaround in budgetary policy defined in May of last year are severe enough in themselves, no less depressing are the effects of the tight rationing of credit. The companies and households of Spain are not the only ones suffering the dearth of credit, but they are also bearing the heaviest consequences of the high indebtedness of the banks, and the abnormal functioning of the wholesale liquidity markets.

The fact that the European Central Bank has exceptionally flexibilized its injections of liquidity in no way means that the restrictions on Spanish growth have been eliminated.

Together with their wariness about liquidity, the Spanish banks will go on appraising solvency risks with great caution. And in determining their outlook, zero economic growth and very high unemployment are not exactly favorable factors. Nor are the budgetary policies of all the economies of the euro zone, oriented as they are to the reduction of public demand.

As for De Guindos' delicate verbal caution about the use of the term recession, it is possible that it may be misplaced even in reference to the euro zone as whole, whose behavior is now causing a downward revision of growth forecasts for the world economy.