"If it weren't for the ECB's usual reluctance to make large changes, there would be a strong case to cut by 50 basis points, and I think the likelihood is perhaps higher than the market expects"
- Frederik Ducrozet, an economist at Credit Agricole SA
Heavily-indebted Spain recorded another contraction in the first quarter of this year, adding to concerns that the economy is far away from the recovery. Spain's gross domestic product shrank 0.5% in the first quarter of the year after contracting 0.8% in the previous three-month period, which was in line with analysts' expectations. On a yearly basis, the economy contracted 2%. The country has experienced eight consecutive quarters of economic decline, and according to the International Monetary Fund forecast, Spain's economic output should contract 1.6% this year and turn to 0.7% growth a year later.
"Obviously the economy needs credit to flow back into [industrial] activity, back in the small and medium-sized businesses so let's hope we're able to reverse the situation in the near future," Javier Hernani, director general and chief financial officer of Bolsas y Mercados Espanoles (BME), said.
Also Tuesday, the Eurostat said that the unemployment rate in the 17-nation economy soared to a fresh high last month, while inflation reached a three-year low, adding more pressure on the ECB to cut the benchmark interest rate. Unemployment in the Eurozone hit 12.1% in March, up from February's 12%, while consumer prices dipped to 1.2% in April, the lowest since February 2010.
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