More debt worries as Spain jobless rate hits 20%
According to the National Statistics Institute (INE), Spain’s jobless rate has now topped 20% in the first quarter of the year and further fuels fears the country’s public finances which have unsettled global financial markets.
The number of unemployed jumped by 280,200 to 4.61 million. This is a higher unemployment figure than Germany which has nearly twice Spain’s population; this now puts the jobless figure at 20.05%. The unemployment rate was 18.83% in the fourth quarter.
The last time the unemployment rate topped 20% in Spain was in the fourth quarter of 1997 when it hit 20.11 percent.
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 has the highest unemployment rate in the 16-nation eurozone and accounts for half the region’s job losses over the last two years, according to the European Union’s statistics office Eurostat.
The rise in unemployment during the first quarter 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 GDP last year.
Ratings agency Standard & Poors cut the country’s long term sovereign credit rating on Wednesday to “AA” from “AA+” amid concerns about the country’s growth prospects; this has sent the both european and global stock markets tumbling on fears that Spain may face similar problems to debt stricken Greece.
S & P´s credit analyst, Marko Mrsnik said that he now believes that the Spanish economy’s shift away from credit fueled economic growth is likely to result in a more protracted period of sluggish activity than we previously assumed.
The Spanish economy, Europe’s fifth largest, shrank 0.1 percent in the fourth quarter from the previous three months, considering that the entire eurozone, the United States and Japan have started to emerge 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 which has now 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.
Prime Minister Jose Luis Rodriguez Zapatero said on Wednesday that unemployment had likely peaked in the first quarter and would now begin dropping.
In January Zapatero unveiled a 50 billion euro austerity plan intended to bring the public deficit to within a eurozone limit of 3.0% by 2013.
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