Spain’s economic woes mount as unemployment rises to highest in 20 years

Spain's economic woes deepened considerably yesterday as the government revealed that unemployment was up to around 25 per cent, the highest in almost two decades, a day after a credit ratings agency downgraded the country's debt and warned it faced an uphill battle to rein in its finances. (See: S&P cuts Spain's ratings to 'BBB+/A-2' on rising debt)

Nervous investors dumped Spanish bonds amid the downbeat outlook.

According to official figures, unemployment has surged to 24.4 per cent in the first quarter of 2012 -- the highest among the 17-country eurozone -- from 22.9 per cent in the fourth quarter of 2011. The data showed that the 365,900 people lost their jobs in the first quarter of the year, which took the number of unemployed to 5.6 million. The rate for people under 25 year was now 52 per cent, up from 48.5 per cent of the previous quarter.

"The figures are terrible for everyone and terrible for the government," foreign minister Jose Manuel Garcia-Margallo told Spanish National Radio. "Spain is in a crisis of enormous magnitude."

According to analysts, the unemployment figure was not unexpected but not so early in the year. This is the second technical recession to hit the country in three years.

IESE Business School economics professor Antonio Argandona said, to prepare for such a steep economic downturn, businesses had been laying people off at a faster rate than expected, said.