Spain considers full bailout from EU as unemployment hits highest level

UNEMPLOYMENT in Spain has hit its highest level since the Franco dictatorship ended in the mid-1970s, succumbing to a crisis of confidence among business and consumers.

The jobless rate rose to 24.6 per cent from 24.4 per cent in the three months to March, the National Statistics Institute said yesterday.

The number of unemployed Spaniards hit 5.7 million, giving the country the highest proportion of people out of work in the European Union.

The figures came as a source said the country’s government has, for the first time, conceded it might need a full EU/IMF bailout worth €300 billion (£235bn) if its borrowing costs remain unsustainably high.

Economy minister Luis de Guindos brought up the issue with German counterpart Wolfgang Schaeuble in a meeting in Berlin last Tuesday as Spain’s borrowing costs rose past 7.6 per cent, the source said.

If needed, the money would come on top of the €100bn already agreed to prop up Spain’s banking sector, stretching the euro zone’s resources to breaking point, and Schaeuble told de Guindos he was unwilling to consider a rescue before the currency bloc’s European Stability Mechanism bailout fund comes on line later this year.

Spain’s economy has stagnated or been in recession since the beginning of 2008. The latest slump, which began in the first quarter, is expected to last into next year while the government said last week it does not expect unemployment to fall below 22 per cent until 2015 at least.

Almost a third of all the euro zone’s jobless are in Spain, with young people the worst hit. According to EU statistics agency Eurostat, half of the country’s people aged under 26 and available for work are unemployed.

Deep spending cuts and hefty tax hikes to reduce one of the euro zone’s highest public deficits have sparked country-wide protests, from massive, largely peaceful marches by the unemployed and public workers to violent clashes between miners and the police.

Anger is growing at the country’s politicians and the banks, kept afloat with public money while basic services, such as health and education, are being dramatically cut.

At an employment office in Madrid, dozens of people queued yesterday, but with little real hope of getting a job.

“They should stop telling us stories and get us out of this situation,” says 34-year-old accountant Jose Maria Collado.

“Of course the real problem is that the banks have done whatever they wanted to do without any control. That’s why we are in this situation.”

Speaking after yesterday’s unemployment figures were released, economist Ben May said: “It’s another example of the dire position the economy is in, and with the economy unlikely to expand any time soon, and probably more likely to fall deeper into recession, things are only going to get worse.”

Spain has repeatedly said it would not need to follow Portugal, Ireland and Greece in seeking a full bailout. A government spokeswoman denied plans for a further bailout.