European economies are shaking off recession but analysts warn the pace of recovery could vary greatly from country to country, revealing a North-South divide, and could be undone by a squeeze on credit.

Economists show near unanimity that official stimulus measures, renewed consumer and business confidence and beefed up production have combined to halt the worst downturn since the 1930s.

The Bank of England’s rate-setters have decided to pump another £50bn of new money into the economy in their programme of quantitative easing.

It will take their total spending to £175bn, unexpectedly going over the £150bn set aside by the chancellor.

In a statement, they said that the UK recession “appears to have been deeper than previously thought”.

The rate-setters also decided to keep interest rates unchanged at their historic low of 0.5% for a fifth month.

The number of unemployed in recession-hit Spain declined in July for the third month running, the government said on Tuesday.

The number of job seekers was down 0.58 percent, or 20,794, in July from the previous month, the employment ministry said.

This follows a fall of 55,250 in June and 24,741 in May, which was the first drop in 14 months.

Spain’s trade deficit narrowed sharply by 59 percent in May compared to the same period last year as imports dropped due to the country’s sharp economic downturn, the industry ministry said Wednesday.

The trade deficit – the gap by which a country’s imports exceed its exports – reached EUR 3.27 billion in May, it said in a statement.

Imports fell 34.3 percent during the month over the previous year to EUR 16.16 billion while exports dropped 22.4 percent to EUR 12.89 billion.

UK unemployment rose by a record 281,000 to 2.38 million, in the three months to May, the Office for National Statistics has said.

The jobless rate increased to 7.6%, the highest in more than 10 years.

The number of people claiming unemployment benefit increased by 23,800 in June to 1.56 million, which was less than analysts had forecast.

Businesses have been cutting jobs as they seek to reduce costs in the wake of the global downturn.

Sales of new cars across Europe rose for the first time in 14 months in June, buoyed by a number of national scrappage schemes, figures have shown.

New registrations across 28 European nations rose by 2.4% last month from a year ago, the European Automotive Manufacturers’ Association said.

Germany, one of the first countries to pay drivers to trade in old cars, led the gains, with registrations up 41%.

Spanish Consumer prices fell by 1.0 percent in the 12 months to June, inflation data showed on Thursday, the fourth monthly decline running.

The final data published by national statistics body INE was in line with a first estimate at the end of June.

In May prices were 0.9 percent lower over 12 months, in April they were 0.2percent lower and in March they were down 0.1 percent.

With its soaring roof and light-filled spaces, Madrid’s Barajas airport is a sign of the good times Spain has enjoyed.

But spend some time in the departure lounge and you can see the signs of the economic downturn.

There is raw emotion at the departure gates. Airlines say 25,000 Latin Americans have bought one-way tickets home.

I met Pilar, from Ecuador, just after she had waved farewell to her sister.

The European Central Bank (ECB) has lent a record amount to eurozone banks hit by the financial crisis.

Banks borrowed 442.24bn euros ($623.8bn; £376bn) of unlimited one-year funds at the lowest rate the ECB has ever offered.

The ECB has lowered interest rates to a record low of 1% and is lending huge amounts to banks to boost lending and revive recession-battered economies.

The ECB is now lending banks funds for up to 12 months, up from six months.

Spain more than doubled its estimate of contraction in the economy this year to 3.6 percent from 1.6 percent forecast previously, in an estimate on Friday.

Speaking after a cabinet meeting, Economy Minister Elena Salgado also said that the government expected the economy to shrink by 0.3 percent next year, recovering to growth of 1.8 percent in 2011 and 2.7 percent in 2012.

Switzerland officially entered a recession in the first quarter when its economy shrank by 0.8 percent from output in the previous quarter and exports fell sharply, official data showed on Tuesday.

“Negative growth impulses emanated in particular from the foreign trade sector,” the Swiss economy ministry said in a statement.

It also revised its gross domestic product (GDP) figure for the last three months of 2008, saying that the economy had shrunk by 0.6 percent instead of 0.3 percent.

The average price of a home rose 1.2pc to £154,016 this month, figures from the building society showed today. The rise – only the second in the past 12 months – leaves house prices 11.3pc lower than they were a year ago.

The figures provide some evidence that the sustained declines seen in the market since late 2007 are easing. The Bank of England and the Government have introduced a blitz of measures to try to revive the once-booming market.

Spanish consumer prices fell 0.8 percent in May from the same time last year in the third monthly decline in a row, raising fears of possible deflation – a prolonged period of falling prices.

In March, Spain posted its first 12-month drop in prices since the national statistics institute INE began tracking inflation in 1961, with a 0.1-percent decline that month. Prices dropped another 0.2 percent in April.

More than 40 per cent of rooms were unoccupied last month, as tour operators and airlines reported falling passenger numbers and businesses cut back on corporate travel, according to a report by the hotel performance analysts STR Global (www.strglobal.com).

Over 43 per cent of hotel rooms in the Americas were empty in April, down by 11 per cent compared with the same month last year; 41 per cent of hotels in Europe and in the Asia/Pacific region (both down by 14 per cent); and 33 per cent in the Middle East/Africa region (down by 13 per cent)

Another 39,478 people registered as unemployed last month, compared with 123,543 who registered in March, Spain’s Labour Ministry said.
Economy Minister Elena Salgado said a government plan to award 400,000 local public work jobs was having an effect.

At 17.4%, Spain’s unemployment rate is the highest in the European Union (EU).

The average across the 27 EU countries is 8.3%.

April was the third straight month in which the rate of increase eased.

The latest offer from a property company in Huelva province in southwestern Spain promises a free divorce lawyer to couples who buy one of their three bedroom houses for 68,000 euros (£61,000).

The deal by Geimsa realtors hopes to capitalise on the number of married couples delaying divorce proceedings because they cannot afford to set up new homes in the current economic climate.

“A contraction of at least 4% is much more likely,” said Benjamin Williamson at the Centre for Economic and Business Research.

“Our latest forecast is for a 4.5% contraction this year, making 2009 the steepest single year contraction in economic activity since the 5.1% fall in 1931.”

The International Monetary Funds predicted a 4.1% decline for 2009.

Chief Secretary to the Treasury Yvette Cooper said the government stood by its forecasts.

In the past year, two million people have lost their jobs taking the total out of work to just over four million.

The Bank of Spain recently predicted the jobless rate would reach 19.4% in 2010, as the recession took hold.

“It is a terrible figure,” Octavio Granado, secretary of state for social security told state television.
He said the first quarter of any year was traditionally bad for employment in Spain.

Spain may revise downwards its economic growth forecast for this year in line with predictions of the International Monetary Fund, Finance Minister Elena Salgado said Thursday.

“Probably we will do the same thing” as the IMF and that of several Western countries, which have recently revised downwards their predictions, she told a news conference.

The revision may be done in the publication by the government, in June and July, of its new economic objectives for the country, she said.

The International Monetary Fund Wednesday called on Spain to implement reforms to improve competitiveness if it is to avoid a prolonged period of slow growth and high unemployment.

It praised the Socialist government for its ‘timely and substantial’ policies aimed at cushioning the impact of the economic crisis, but warned against further fiscal stimulus measures unless the situation worsens.