Spanish unemployment — already the highest in Europe — spiked up again today, piling more pressure on the struggling Madrid government and sending investors scurrying for safety.
Official figures showed the number of jobless rose by 365,900 in the first three months of the year, taking headline unemployment to 24.4%. Youth unemployment rose to 49.6%.
Economists warned accelerating joblessness will undermine the government’s efforts to slash Spain’s deficit from 8.5% of GDP to 5.3% by the end of the year.
The dire employment figures followed a downgrade of Spain’s sovereign debt by two notches last night by Standard & Poor’s, with the credit rating agency citing the poor outlook for growth and rising public debt levels.
The country’s 10-year borrowing costs rose close to the 6% danger zone in trading this morning on the bad news.
Madrid will publish its official GDP figures for the first quarter of the year on Monday, but the Bank of Spain has already estimated that the economy shrank by 0.4 per cent over the three months, which would put the country firmly back in recession.
In further signs of intensifying eurozone financial stress, Italian borrowing costs also jumped today, after Rome was forced to pay 5.84% to offload €5.95 billion (£4.85 billion) at an auction, up from 5.24% at a similar sale in March.
