Spain jobless rate eases to 20.89% but still at record level

29th July 2011, Comments 0 comments

Spain's unemployment rate eased slightly in the second quarter to 20.89 percent, according to official data released Friday, but remains the highest in the industrialised world.

At the end of June there were 4.83 million people unemployed in the country, down from 4.91 million at the end of March, or a rate of 21.29 percent, the National Statistics Institute (INE) said.

The figures were published against a background of severe strains on the Spanish economy arising from depressed economic activity and high public deficits and debt.

Unemployment soared in Spain after the collapse of the property bubble in 2008, which helped plunge the country into recession. It stabilised in 2010 and has shown slow growth in early 2011.

The latest jobless rate remains above the level of of 20.33% in the fourth quarter of 2010, which at the time was already the highest since 21.30% in 1997.

The rate reached its lowest level, 7.95 percent, in 2007.

Unemployment, currently the highest in the European Union and in the countries of the Organisation for Economic Cooperation and Development (OECD), remains the principal black spot in the battered economy.

The government has revised downwards its jobless forecast for 2011, to 19.8% from 19.3% previously.

Madrid has also cut its growth predictions for 2012 and 2013, forecasting 2.3% and 2.4% respectively, instead of 2.5% and 2.7%.

Ratings agency Moody's announced earlier on Friday that it was planning to downgrade Spanish debt, currently at a "Aa2" rating, due to the country's budget problems.

Moody's said that the pressure on Madrid could be exacerbated by fears over the new European deal to rescue Greece which had "created a precedent" by involving the private sector and signaled a growing risk for investors holding bonds in the fragile countries of the eurozone.

It also threatened to lower the ratings of four Spanish banks, including the eurozone's largest Santander, as well as the country's confederation of savings banks.

Spain, with an economy the size of the Greek, Irish and Portuguese economies combined, has been battling to convince markets that it should not be lumped together with the three lame ducks now under EU and IMF rescue programmes.

But it continues to suffer from the risk of contagion from the crisis.

The government has enacted measures to strengthen bank balance sheets, cut state spending, raise the retirement age, liberalise the labour market and sell off assets.

It's goal is to cut the annual public deficit from 9.24 percent of Gross Domestic Product in 2010 to 6.0 percent this year, and to a eurozone limit of 3.0 percent in 2013.

© 2011 AFP

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