Palma.— “It wouldn't surprise me if the Balearic Islands had to ask Spain's Central Government for a bailout,” Josep Oliver, the President of regional business federation “CAEB” said yesterday. “Other regions of the country have already approached Central Government for the same reason,” said Oliver, referring to Catalonia, Valencia and Murcia.

Speaking at a presentation of the Balearics' economic performance during the first half of 2012, Oliver highlighted the seriousness of asking for a bailout. “It would be just the same as asking for a loan,” he warned.

Oliver said that the term “rescue” has become almost fashionable in financial circles along with another - “risk premium.” He pointed out that these words have only come into use recently and that Central Government should define precisely what it means when referring to “bailout” and “rescue.” Expectations not met
Oliver pointed out that the income of the Balearic government related to Value Added Tax had not been as high as it should have been in the first half of the year. Because expectations were not met, said Oliver, “it could mean that this year's budget has been ruined.” He predicted a downturn in the Gross Balearic Product (PIB) this year of between 0.5 and 1 percent, which compares unfavourably with the growth of 0.5% registered in 2011.

Oliver said that lower income for the government from VAT both in general and tourist businesses has already had an important effect on economic activity resulting in a downturn of 0.2 to 0.3 percent in the first half of the year alone. The slump is in stark contrast to the increase in PIB of 0.2 percent forecast this year by the Balearic government, and is in fact more in line with the decline of 0.3% predicted by the Centre for Economic Investigation (CIS).

The details emerging at yesterday's presentation boded ill for consumer confidence, investment, industrial performance, business activity and employment. “The situation is complicated but we are not facing the same difficulties as some regions elsewhere in Spain,” claimed Oliver. He predicted that the tourist season this year would be “slightly, but not much, better” than in 2011, although he expressed doubts over the success of the Services industry from October until the end of the year.

Rises in VAT in tourist businesses and in airport taxes will only serve to strain an industry competing with other cheaper, emerging markets, said Oliver. He said that Central Government has still not taken into account the higher costs which the Balearics has to face by virtue of it being an island community, whilst the Canary Islands is compensated.

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