Spain’s economy shrank 0.1 per cent in 2010 as its unemployment rate scaled the highest peaks in the industrialised world, official data showed yesterday.

Spain slashed spending through the year to rein in a bulging public deficit and fight off the threat of an Irish-style debt crisis.

The feeble economic activity was evident in a jobless rate that ended the year at 20.33 per cent, the highest in the Organisation for Economic Cooperation and Development.

Spanish total economic output, or gross domestic product, edged up 0.2 per cent in the last quarter of 2010, the National Statistics Institute said, confirming preliminary figures released February 11.

But over the year as a whole, Spain’s GDP declined 0.1 per cent, making it one of only three eurozone countries along with Greece and Ireland to have contracted in 2010. The Spanish economy slumped into recession during the second half of 2008 as the global financial meltdown compounded the collapse of the once-booming property market.

It emerged with meagre growth rates in the first half of 2010 - 0.1 per cent in the first quarter and 0.2 per cent in the second - before showing zero growth in the three months to September.

Spain’s government has cut spending, announced sell-offs and reformed the labour code and pension system in an effort to regain the confidence of international investors .