German studies say Spain will be back in recession in 2012

The report, considered to be a reference point in Germany, forecasts that the Spanish economy "will contract temporarily" over the next few months because of "increasing insecurity" due to the debt crisis and the high unemployment rate.

Furthermore, the instiutions point out that Spain's current GDP is 3.8% below pre-crisis levels, and they believe that consumer spending will remain below minimum levels because of high unemployment and high private debt.

It is their belief that Spain's jobless figures will remain high, with a rate of 21% forecast for this year and 21.5% for the coming year.

They forecast that the Consumer Price Index (CPI) in Spain will close the year 2.9% up on last year, a long way short of the the 2% that the European Central Bank (ECB) is looking for, mainly because of the increase in fuel prices, tax pressures and administrative costs.

Nevertheless, high unemployment and stagnated domestic demand will push inflation down to just 1% next year they say.

The report estimates Spain's public deficit at 6% for this year and 5.6% in 2012, well above the 3% maximum established by the EU pact on Stability and Growth.

The economic crisis is having a serious effect on the eurozone economies, says the report, adding that Germany is moving dangerously close to a full-scale recession.  The report suggests that because of the huge public debt in peripheral countries and problems with bank capitalisation, Germany's GDP will grow by 2.9% this year, but by only 0.8% in 2012.