Spanish Growth Will Return After Structural Change, Solbes Says

By Jonathan Browning

Sept. 9 (Bloomberg) -- The Spanish economy, which may deteriorate in the coming quarters, will ultimately benefit from two decades of structural transformation, Pedro Solbes, the nation's finance minister, said.

The Spanish economy will remain weak until next year with high unemployment and high inflation, he said, writing in the Financial Times. The rate of domestic growth will then improve in 2010 as the government maintains investment in infrastructure and education, Solbes said.

The government and Spanish companies have invested in domestic infrastructure, which, together with a stable savings rate, has led to a considerable current account deficit, he said.

Spanish banks are solvent and well-placed to withstand the deterioration in the economy, Solbes said. Financial institutions have been hit by tighter credit conditions and the deterioration in the domestic housing market. Yet other Spanish companies have proven to be competitive in international markets, the finance minister said.

The Spanish government also delivered a surplus of more than 2 percent of gross domestic product in 2007 and cut its public debt to 36 percent of GDP. This allowed the government to implement measures to mitigate an economic slump, Solbes said.

To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net