The number of registered job seekers in Spain hit a new high in March, the government said last Tuesday, adding to its headaches as it tries to reduce the public deficit with a tough 2012 budget.

The country is racing to slash its public deficit to reassure markets

The number of workers registered as without work climbed by 0.82 per cent from the previous month to reach 4.75 million, the highest figure since the current statistical series began in 1996, the labour ministry said.

The rise – the eighth monthly increase in registered unemployed – comes as Spain heads back into recession with the economy expected by the government to contract by 1.7 per cent this year after expanding 0.7 per cent in 2011.

It makes it harder for the government to meet its goal of bringing the public deficit down to 5.3 per cent of output this year and to within a EU-limit of three per cent next year as it causes spending on jobless benefits to rise.

The latest unemployment figures were released on the same day that Budget Minister Cristobal Montoro presented his government’s 2012 budget to lawmakers.

The budget – approved by the cabinet on March 30 – raised various taxes and froze wages of public sector employees, but spared jobless benefits and pensions amid growing public anger at the dire economic situation.

The country is racing to slash its public deficit to reassure markets that it will not follow Greece, Ireland and Portugal in requesting an international bailout after it missed its public deficit target last year.

Spain had agreed to cut its annual public deficit to six per cent of GDP in 2011 but it ended up reporting a deficit of 8.51 per cent of GDP.

“We are convinced that this budget will meet the challenge of recovering the confidence of our European partners,” Montoro told a news conference held in the parliament.

Spain’s unemployment rate, released quarterly by the national statistics institute and which includes registered and unregistered unemployed, stood at 22.85 per cent at the end of 2011 with 5.27 million jobless.

The government expects the jobless rate – already the highest in the industrialised world – to hit 24.3 per cent this year as the economy continues to reel from the collapse of a labour-intensive property boom in 2008.

To fight unemployment, Prime Minister Mariano Rajoy’s conservative government passed a labour reform package last month which makes it cheaper and easier for companies to lay people off and cut wages unilaterally.

The government argues that the reform – which has been hotly contested by unions – will spur job creation in the long term as it will make Spanish labour competitive even though unemployment will rise in the short term.