Spain jobless rate tops 20%, adds to debt worries

People queue at a government employment office in the centre of Madrid on April 30. AFP photo

MADRID (AFP) – Spain's jobless rate topped 20 percent in the first quarter, official data showed Friday, fuelling fears over the country's public finances which have rattled global financial markets.

The number of unemployed jumped by 280,200 to 4.61 million, more than in Germany which has nearly twice Spain's population, for a jobless rate of 20.05 percent, said national statistics institute INE.

The unemployment rate rose from 18.83 percent in the fourth quarter.

The last time it topped 20 percent in Spain was in the fourth quarter of 1997 when it hit 20.11 percent.

Economy and Finance Minister Elena Salgado sought to put a bright face on the figures, telling reporters that the pace of job losses was "much less pronounced" than during the first quarter of 2009.

"But that does not hide the gravity of these figures and the government's determination to devote the necessary effort to create jobs," she said.

Spain's jobless rate has soared since the global credit crisis hastened the collapse of its labour-intensive construction industry at the end of 2008.

The country's unemployment rate is double the record high of 10 percent posted in the entire 16-nation eurozone in March, according to figures released Friday by the European Union's statistics office Eurostat.

The rise in unemployment means Spain's socialist government, which has vowed to protect social welfare spending, will face an even bigger bill for jobless benefits as it tries to rein in a public deficit that hit 11.2 percent of output last year.

Ratings agency Standard & Poor's cut the country's long-term sovereign credit rating on Wednesday to "AA" from "AA+" amid concerns about the country's growth prospects, sending the euro and global stock markets tumbling on fears Madrid faces similar problems to debt-stricken Greece.

The Spanish economy, Europe's fifth largest, contracted 0.1 percent in the fourth quarter from the previous three months, even as the entire eurozone, the United States and Japan emerged from recession.

Spain has proved especially vulnerable to the global credit crunch because growth relied heavily on credit-fuelled domestic demand and a property boom boosted by easy access to loans that has collapsed.

French investment bank Natixis estimates that prior to the crisis 30 percent of Spain's working population worked directly or indirectly for the construction industry.

The government has spent billions of euros in stimulus measures aimed at curbing the economic contraction and stemming job losses.

Prime Minister Jose Luis Rodriguez Zapatero, elected to a second four-year term in 2008, said Wednesday that unemployment had likely peaked in the first quarter and would now begin dropping.

He also predicted that the economy may have returned to growth during the first three months of the year.

But Raj Badiani, economist at IHS Global Insight, predicts the unemployment rate will remain above 15 percent of the labour force until 2013.

"There is a major risk that unemployment will remain uncomfortably high for several years as Spain struggles to generate a sufficient number of jobs," he said.

The leader of the conservative opposition Popular Party, Mariano Rajoy, blasted the government, saying the latest unemployment figures were proof that "a radical change in economic policy is needed."

"A country where 20 people out of 100 who want to work are not able to is a country where things are going badly," he added.

In January, Zapatero unveiled a 50-billion-euro austerity plan intended to bring the public deficit to within a eurozone limit of 3.0 percent by 2013 but many analysts argue more measures will be needed for this target to be met.

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