Spain to Subsidize New Auto Purchases to Combat Recession

Spain's auto manufacturing sector is the third-biggest in Europe and accounts for just under 10% of the country's economic output and 15% of exports.

Spain announced on May 12 a subsidy of 2,000 euros (US$2,700) for motorists wanting to buy a new car, one of several new measures to revive the recession-hit economy.

"We will propose a plan of direct aid for the purchase of a car," Prime Minister Jose Luis Rodriguez Zapatero told parliament during an annual "state of the nation" debate. The measure is similar to others already in operation in several European countries.

Five hundreds euros (US$680) will be provided by the central government, another 500 euros will come from Spain's regional governments while the remaining 1,000 euros would be provided by car manufacturers.

During the first four months of the year, new car registrations in Spain plunged 43.7% to 471,299 compared to the same period in 2008.

In 2008, new car sales plunged 28%, the largest-ever annual decline as the country slumped into its first recession in 15 years.

The economy, the fifth largest in Europe, entered recession at the end of last year as the international financial crisis hit an already weakened building sector which had been the country's engine of growth for the previous decade. The unemployment rate has nearly doubled over the past year to reach 17.4% in the first quarter, the highest level in the 27-nation EU and double that of the U.S.

Zapatero also unveiled other measures to revive the battered economy, one month ahead of European elections. They included a reduction in taxes for small businesses and a 20-billion-euro fund to finance sustainable development projects in a bid to end the economy's reliance on the battered construction industry. He also promised a further reduction of one billion euros (US$1.36 billion) in spending for 2009 in a bid to reduce the burgeoning public deficit.

Copyright Agence France-Presse, 2009

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