Jun.19 - The International Monetary Fund says Spain has made strong progress in stabilising its economy, but warns the focus must now be on addressing the country's jobs crisis. Ciara Sutton reports.
Prime Minister Mariano Rajoy and Prince Felipe tested out Spain's new high speed rail route earlier this week. But its maiden voyage was met with angry protests. Spain may have a love affair with grand projects but it's struggling to pay for them. But the IMF says there may be some light at the end of the tunnel. In its annual look at the country's economy it says strong progress has been made. (SOUNDBITE) (English) JAMES DANIEL, IMF MISSION CHIEF FOR SPAIN, SAYING; " Is this recovery really going to be strong enough to generate jobs. That's where the uncertainty is. The uncertainty is not around is the economy stabilising - there I think the government is quite right, there are clear signs of stabilisation. What we want are clear signs of strong growth, clear signs of employment recovery, and that's where the question mark is." Spain is struggling to shake off 5 years of on-off recession and bring down one of Europe's highest unemployment rates - nearly one in three are out of work The fund says the government must focus on job creation and banking reform (SOUNDBITE) (English) RANJIT TEJA, DEPUTY DIRECTOR, EUROPEAN DEPARTMENT, IMF, SAYING; "Nothing helps raise demand like a man or a woman with a job and an income. So that's why the focus on wage adjustment, on labour market reform is precisely to produce aggregate demand, that will create people with incomes. Right now you're losing aggregate demand because people don't have a job." Labour law reforms are already on the cards - to allow easier hiring and firing But the IMF says the challenges aren't just Spain's resposibility - the European Union must play a part by forming a banking union and the ECB should reduce the high borrowing costs for the private sector. The country could return to growth later this year but it's banking sector remains fragile and could delay credit flowing back into the real economy.