Business News

Spain's unemployed surpass 5-million mark for first time

Jan 27, 2012, 11:34 GMT

A file photo dated 02 December 2011 showing a large queue of people at an Unemployment Office in Madrid, Spain. EPA/JUANJO MARTIN

Madrid - The number of jobless people in Spain increased by 295,300 to 5.27 million in the fourth quarter of 2011, surpassing the 5 million mark for the first time in history, the statistics body INE said Friday.

The INE put the unemployment rate at 22.85 per cent, up from 21.5 per cent in October.

About 1.6 million households in Spain now have all their active members out of work.

Unemployment increased most among people aged 25 and 54 years - by 286,000 - in the fourth quarter. However, it went down among people aged less than 25 years.

Spain's unemployment rate is the highest in the European Union and about twice the EU average. Eurostat data put the youth jobless rate at nearly 50 per cent.

However, the figures do not take into account the informal economy, which is estimated to contribute up to 20 per cent of gross domestic product.

The global crisis hit Spain particularly hard, contributing to the meltdown of its important property sector. Unemployment is expected to keep rising as the economy sinks into a recession this year.

Prime Minister Mariano Rajoy's conservative government, which took office in December, is planning to create jobs with measures such as tax breaks for entrepreneurs and a reform to make the labour market more flexible.

Unions and employers reached an agreement this week to limit salary hikes, disconnecting them from inflation.

The soaring unemployment could create 'a lost generation,' warned Ana Laborda, professor at the ESADE business school.

Jose Manuel Gonzalez-Paramo, a member of the European Central Bank executive board, described a labour market reform as 'urgent' in light of the new unemployment figures.

'We could not be worse,' Gonzalez-Paramo said, stressing that Spain needed 'any gains that can be possibly be made with the labour reform.'

The government is simultaneously trying to trim the 8 per cent budget deficit with spending cuts, which critics see as undermining growth and unemployment.