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Spanish economy shows signs of getting back on track

People wait in line at a government employment office on Paseo de las Acacias in Madrid on Dec 2, 2014. Fewer Spaniards stood in jobless queues in 2014, consumer spending rose and banks boosted lending - all signs pointing to Spain's economy getting back on track after six years of a gruelling financial crisis.

[MADRID] Fewer Spaniards stood in jobless queues in 2014, consumer spending rose and banks boosted lending - all signs pointing to Spain's economy getting back on track after six years of a gruelling financial crisis.

The number of people registered as unemployed in 2014 dipped by 253,627 to 4.45 million, the labour ministry said this week.

It was the second consecutive yearly drop since a decade-long property bubble burst in 2008, throwing millions of people out of work.

While the unemployment rate - which is calculated differently - was 23.67 per cent in the third quarter, one of the highest rates in the industrialised world, the dip in the jobless numbers last year gives a ray of hope to job seekers, many of whom have seen their unemployment benefits run out.

"Today there is greater confidence in Spain in the ability to find work in the coming months," said Labour Minister Fatima Banez of the ruling conservative government which faces regional and legislative elections this year.

One in two Spaniards, 51 per cent, believe their personal economic situation will improve or at least remain stable in 2015, according to a survey by DYM Market research published last week by online newspaper El Confidencial.

Those who fear that the new year will be one of economic difficulty fell to 36 percent from 51 per cent during the same time a year earlier.

The growing optimism has also spurred a shopping spree.

Sales over the Christmas season, which in Spain ended on Tuesday on the Feast of the Epiphany when gifts are traditionally opened, are expected to post their biggest rise in seven years.

In November retail sales posted a 1.9 per cent increase over the same year-ago period.

New car sales - a key measure of demand - jumped 18 per cent in 2014 to 855,308 vehicles, the best annual performance since 2010, helped in part by a government subsidy scheme, according to carmakers association Anfac.

Government borrowing costs are down and banks, which were saddled with bad debt after the property crash in 2008, also appear more willing to lend, the Bank of Spain said in its latest bulletin on the state of the economy.

A tax reform which came into effect in January may also give the economy a boost. It will reduce the tax bill of the lowest-income groups on average by 320 euros (US$385) per household per year, according to the government.

Spain emerged timidly from recession in mid-2013 and in the second quarter of 2014 posted its strongest quarterly growth since 2007, expanding by 0.6 per cent.

Prime Minister Mariano Rajoy's government estimates the economy will have expanded by 1.3 per cent in 2014 and will grow by 2.0 per cent in 2015, a faster growth rate than is expected in France, Germany and Italy.

And foreign investors are stepping back into Spain.

They poured 47 billion euros (more than US$55 billion) into the eurozone's fourth-largest economy last year, up from 20 billion euros in 2013, according to an estimate by daily business newspaper Expansion.

US billionaire Warren Buffett, nicknamed the "Sage of Omaha" for his successful track record in investments, opened an office in Madrid to seize opportunities in the real estate market where prices have stabilised.

Mexican telecoms magnate Carlos Slim, the world's second-richest man, reached a deal in November to become the main shareholder in Spanish builder FCC, edging out a competing bid for the firm by another US billionaire, George Soros.

Opposition parties and some commentators have accused the government of pre-election "triumphalism". They argue that the majority of the new jobs which have been created are short-term positions while the government at the same time has slashed social protection.

The number of short-term job contracts rose by 12.6 per cent to 15.37 million last year, compared with just 1.35 million new permanent job contracts, which however represented an increase of 18.9 per cent from a year earlier.