Spanish unemployment at record high after downgrade | News | DW | 27.04.2012
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Spanish unemployment at record high after downgrade

Almost one in four members of Spain's workforce have no job, more than half of under-25s are now unemployed. The data comes hours after Spain's credit rating was downgraded. The conservative government pledged more cuts.

The Spanish government on Friday unveiled plans to further cut government spending and raise taxes in a bid to rein in its budget deficit while admitting that latest jobless data was "terrible."

Economy Minister Luis de Guindos also said the array of Spanish municipalities would be shrunk to reduce spending.

Spanish Economy Minister, Luis de Guindos, with a raised left hand during a press conference

Slashing spending: Economy Minister Luis de Guindos

Spain's budget deficit is currently at 8.5 percent of gross domestic product, well above the EU target of 3 percent. The minister said the government would aim for the 3 percent EU target next year, and 1.1 percent by 2015.

Planned hikes in value added tax on fuel, tobacco and alcoholic beverages plus other sources of revenue would funnel an extra 8 billion euros ($10.5 billion) into state coffers in 2013, de Guindos estimated.

Half of young adults jobless

Labor market data released by the National Statistics Institute showed that 366,000 people lost jobs in the first quarter of 2012, compared to last year's final quarter, leaving 5.6 million Spaniards out of work. That is 24.4 percent of Spain's overall workforce.

Among people under 25 the jobless rate climbed to 52 percent - more than half in that age bracket. In the previous quarter it was 48.5 percent.

"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."

Professor Antonio Argandona of the IESE Business School said firms had been laying off workers faster than anticipated, foreseeing an economic downturn.

Ratings downgrade

The jobs data followed within hours a credit downgrade by Standard & Poor's (S&P). It stripped Spain of an A rating, placing it on BBB+. S&P cited worries over Spain's banking system and poor economic prospects.

Watch video 01:07

S&P lowers Spain's rating

In addition, the Bank of Spain disclosed that commercial banks had accumulated problematic real estate loans worth 184 billion euros, equating to 60 percent of their property portfolio, as the result of Spain's housing market collapse.

Spain economy is the eurozone's fourth largest and double the size of the combined economies of the three countries that have as yet received emergency loans from the EU and IMF - Greece, Portugal and Ireland.

Earlier this year, Spain's government had pledged 37 billion euros in spending cuts and tax hikes.

Confidence despite alarm

Germany on Friday expressed confidence in Spain's ability to overcome its crisis.

A spokesman for Chancellor Angela Merkel, Steffen Seifert, said Berlin believed that Spain was doing "whatever is necessary to overcome the challenges."

Spanish government spokeswoman Soraya Saenz added: "If we all work together, we will get out of the crisis."

The European Commission said it "remains convinced" that Spain's reforms were the "best way" to reassure jittery markets.

Iberia pilots call off planned strikes

Pilots of Spain's largest airline, Iberia, have meanwhile canceled their plan to stage multiple work stoppages after the government persuaded the airline and pilots' union, Sepla, to accept mediation. The intended strikes would have seen stoppages every Monday and Friday through to July 20.

Iberia aircraft on tarmac in Madrid

Spain's troubled airline

Sepla pilots object to the creation of a low-cost airline, Iberia Express, which was launched last month, saying it could lead to the loss of 8,000 jobs in the core aircarrier. Iberia Express will focus on national and inner-European routes leaving Iberia free to expand on the more lucrative trans-Atlantic circuit.

British Airways, a partner in Iberia, had put pressure on Spain's loss-making carrier to implement savings.

ipj/msh (dpa, AP, AFP)

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