Spain back in recession as economy contracts

A Spanish flag flies over a military building with a symbol of the Franco era in Barcelona Thursday Oct. 11, 2007. Statues, street names and other symbols honoring Gen. Franco and his 40-year rule would be eliminated under a bill, presented by ruling Socialist Party, that seeks to make amends to victims of the Spanish Civil War. (AP Photo/Manu Fernandez)

(AP) MADRID - Spain is back in recession as the economy contracted 0.4 percent in the first quarter of the year, the central bank said Monday.

The figure published in a Bank of Spain monthly report followed a 0.3 percent decline in the fourth quarter. A technical recession is commonly defined as two consecutive quarters of economic contraction.

The news of recession comes as no surprise, however - the new conservative government has said the economy is shrinking and forecasts it will contract 1.7 percent this year.

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It has approved labor market and financial sector reforms, taken drastic deficit-reduction measures, and warned Spaniards to prepare for a rough patch as things will get worse before they better. The jobless rate is nearly 23 percent and expected to rise.

The Bank of Spain's figure is a preliminary estimate. The official GDP figure from the National Statistics Institute comes out April 30.

In financial markets, the country remained under pressure on Monday - the yield, or interest rate, of 10-year Spanish bonds rose 4 basis points to 5.97 percent. The Ibex-35 stock index slumped 2.7 percent.