French, Spanish leaders meet on economic crisis

French President Nicolas Sarkozy is meeting with his Spanish counterpart Jose Luis Rodriguez Zapatero on Friday with the economic crisis on the agenda. The gathering follows Zapatero accusing the IMF of inaction.


Spain on Thursday disputed an IMF forecast that the Spanish economy will shrink by 0.2 percent next year, saying it does not take into account recent interest rate cuts and the drop in oil prices.

"We will have to wait to see how reality evolves to know what the real figure will be," Economy Minister Pedro Solbes told reporters in Madrid on the sidelines of an economic conference.

The International Monetary Fund also predicted Wednesday in its latest World Economic Outlook that Spain's economy, the fifth largest in the European Union, would expand by just 1.4 percent this year.

It forecast that Spain's unemployment rate would climb to 11.2 this year and hit 14.7 percent in 2009.

"Spain will be harder hit than other European countries because of the boom in the housing sector that the country has experienced," the director of the IMF's research department, Olivier Blanchard, told a news conference to unveil its latest economic forecasts.

Spain's socialist government predicts the economy will expand by 1.6 percent this year and 1.0 percent in 2009.

It forecasts the unemployment rate will rise to to 12.5 percent in 2009, after hitting 8.3 percent last year.

Labour Minister Celestino Corbacho said Thursday that the government stood by its unemployment forecasts.

Spain's economy expanded by 3.7 percent last year but has begun to slow down as the key property sector is hammered by high interest rates, oversupply and the global credit crunch.

Prime Minister Jose Luis Rodriguez Zapatero on Wednesday critized the IMF for inaction during the global financial crisis.

"After all that has happened in recent months I have not heard any initiative from the IMF, it being the body that it is, and having a role to play," he told a joint news conference in Cordoba.

"I respect its forecasts but when it comes to forecasts the government always works to improve on them in terms of growth and jobs," he added.

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