Spain announced yesterday its jobless rate shot to a 17-year high of 22.85 per cent at the end of 2011, the highest in the industrialised world, as unemployment punched above five million.
The news made grim reading for Spaniards, who face the prospect of recession in 2012 with jobless numbers likely rising even further as national and regional governments axe spending.
The number of unemployed burst through the five-million mark, surging 295,300 to 5.27 million in the last quarter of 2011, the National Statistics Institute report showed.
As a result, the jobless rate hit the highest level since the first quarter of 1995, rising to 22.85 per cent at the end of the year from 21.52 per cent the previous quarter.
Young people were hit especially hard, with more than half of 16-24 year olds – 51.4 per cent – out of work on December 31 compared with 45.8 per cent on September 30.
At a jobs centre in the outskirts of Madrid, people queuing in the morning cold were resigned.
“The local authorities are cutting now more than ever. Before the job agency would call me all the time. Now you can go six months of the year without them calling,” said Isabel Ruiz, a 40-year-old social worker and mother of a 15-month-old boy.
Daniel Gazdoiu, 44, a Romanian, lost his job as a van driver for a building firm just two weeks earlier.
“I have just become unemployed. Things are going badly. I worked for seven years as a driver in a building firm but now there is no work. We will see if we can find work here or in another country.”
It makes a stark contrast from the heady days of Spain’s property boom, when the unemployment rate fell to just 7.95 per cent in 2007.
The 2008 property bubble collapse and global financial crisis destroyed millions of jobs, left banks with huge bad loans, and Spain’s national and regional governments with big debts.
The country’s new right-leaning Popular Party government is now struggling to slash a bloated public deficit and avoid being dragged back to the centre of a crisis of confidence in eurozone sovereign debt.
Prime Minister Mariano Rajoy plans €8.9 billion in new budget cuts, tax increases to rake in €6.3 billion, and an anti-tax fraud campaign to recoup about €8.2 billion.
But that cost-cutting opens the prospect of even more job losses in hard economic times, with the International Monetary Fund predicting the economy will shrink by 1.7 per cent in 2012 and 0.3 per cent in 2013.
The rising unemployment rate is partly the result of a slower economy, said Javier Velazquez, professor at Madrid’s Complutense University.
“It is also somewhat the consequence of such rapid fiscal adjustment measures: obviously that is generating a contraction in demand and that also determines the rise in unemployment,” he said.
Higher jobless numbers also make it extremely difficult to curb the deficit because the state must pay more in unemployment benefits while receiving less income from taxes.
Doubts are now rising over whether Mr Rajoy can fulfil a promise to cut the deficit to 4.4 per cent of gross domestic product in 2012 after the deficit blew out to an estimated eight per cent of GDP last year.
“Spain will respect the deficit target. Today that is 4.4 per cent and Spain will respect that target,” Mr Rajoy told a news conference this week.
On Sunday, Spanish budget minister Cristobal Montoro had called for the deficit target to be relaxed because the 2012 growth forecasts on which it was based no longer look attainable.