Spain′s problems mount as unemployment hits new record | Business| Economy and finance news from a German perspective | DW | 27.07.2012
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Spain's problems mount as unemployment hits new record

The jobless rate in Spain has continued to rise as the country has entered a third quarter of economic contraction. Spain holds the sad record of highest unemployment in the industrialized world, with no end in sight.

Spain's unemployment rate surged to 24.63 percent between April and June, with the number of registered jobless people rising to 5.7 million, the country's national statistics office announced Friday.

Joblessness was particularly rife among young people between 16 and 24 years of age, the office said, where unemployment had risen to a rate of 53.2 percent from 52.01 percent in the first quarter of 2012.

However, the speed of the jobs decline was slowing, as 53,500 people lost their jobs in the second quarter, compared with 365,900 in the three months preceding that period.

Nevertheless, a similar level of unemployment has not been reached since 1994, when it stood at 24.55 percent. The biggest job losses were reported in agriculture and industry, which were just partly offset by job creation in the tourism and construction sectors.

As Spain sees the third consecutive quarter of recession, Prime Minister Mariano Rajoy expects unemployment to continue rising in 2012.

ECB lifeline

Spain's economic problems are aggravated by exorbitantly high and rising borrowing costs, reflecting Madrid's unsuccessful attempts to come to grips with a banking crisis and spiraling national debt.

Meanwhile, it has transpired that Spain, as well as debt-laden Italy, might be thrown a financial lifeline from the European Central Bank (ECB) and the eurozone.

France's daily newspaper "Le Monde" reported Friday that the two parties were preparing to intervene on financial markets to help bring down Spanish and Italian credit costs.

Citing an unnamed source, the newspaper said that the plan was for the ECB to buy Spanish and Italian government bonds on the secondary market, while the European Financial Stability Facility fund, EFSF, should buy such debt on the primary market.

"Le Monde" also wrote that the plan was days or possibly weeks away from being finalized, and that German Chancellor Angela Merkel was discussing the plan with French president Francois Hollande during a telephone conversation Friday.

uhe/jm (dpa, Reuters)