It is beginning to feel as though there is no end in sight to the global financial crisis and in those countries most affected, recovery seems a long way off. For Spain, the property market crash in 2008 contributed heavily to its downfall and real estate prices are continuing to plummet, despite considerable activity from overseas buyers. But what can be done to turn the tide?

For prime minister Mariano Rajoy, tackling unemployment is the answer. In an interview with the Financial Times, he explained that the only way to stimulate the economy again is to get Spaniards back into the workplace. This will help to reinvigorate the domestic property market and prevent widespread loan defaults. Labour reforms ushered in by the government are already helping to put employment levels back on the straight and narrow, according to Mr Rajoy. The changes make it easier for businesses to depart from region-wide collective wage agreements, make flexible deals at factory level and sack workers on fixed contracts.

While Spain is clearly not out of the doldrums just yet, there are signs that Mr Rajoy's policies are working. Preliminary data from the National Statistical Institute has shown several economic indicators are slowly improving. The seasonally adjusted Industrial Production Index showed a 2.4 per cent month-on-month increase in December 2012 and a working day adjusted rise of 4.1 per cent on December 2011 levels.

The mining and quarrying industry enjoyed a particularly strong end to the year, increasing production by 21.9 per cent, while electricity, gas, steam and air conditioning supply experienced 9.6 per cent growth. However, manufacturing production fell by a further 0.2 per cent, with the majority of losses noted in the manufacture of basic metals (15.6 per cent), rubber and plastic (15 per cent) and beverages (12 per cent).

Although it is possibly too early to celebrate, increases in production and slowing house price declines are cause to look to the future. For the Spanish property market, there is hope that domestic activity will return over the coming years, while foreign buyers continue to keep the sector ticking over, taking advantage of low prices while they last.



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