Spanish unemployment rate rises to 24.63% in Q2, up from 24.44% in Q1; 5.7 million people out of work

Nevin Barich

MADRID , July 27, 2012 (Associated Press) – The number of people out of work in Spain shows no sign of dropping, with almost one in four people unemployed and half of those under the age of 25 jobless, the National Statistics Institute said Friday.

The recession-hit country's unemployment rate rose 0.19 percentage points in the second quarter on the previous three months to 24.63 percent, the institute said. The rate is the highest among the 17 nations that use the euro currency.

The institute said 53,500 people more joined the ranks of the unemployed between April and June, making for a total of 5.69 million people out of work.

For those under 25 years of age, the unemployment rate climbed to 53 percent, up from 52 percent in the previous quarter.

Spain is battling to avoid having to seek a full-blown financial bailout as it struggles to emerge from its second recession in three years and strives to convince investors it can manage its finances.

The government is adamant it won't need help.

"No rescue is going to be sought, The idea of a rescue is discarded," Deputy Prime Minister Soraya Saenz de Santamaria said.

The crisis and the government's reforms and austerity measures have led to almost daily protests by workers throughout Spain. On Friday, several thousand taxi drivers marched through the center of Madrid protesting local government plans to open up the sector to more drivers.

Violence broke out when some protesters began attacking several taxis not taking part in the protest, breaking windows, wing mirrors and beating the bodywork. In at least one incident, an elderly passenger was ordered out of a taxi before the protesters began attacking the vehicle.

Last month, the eurozone agreed to lend Spain up to €100 billion ($123 billion) to help strengthen banks laden with soured investments following a property sector collapse in 2008.
Also, many of Spain's 17 regions are so heavily in debt due to the recession and the real estate crisis that they cannot raise money on their own on financial markets. Already two regional governments have said they will tap an €18 billion federal emergency credit line.

The country is also under severe pressure to apply austerity measures and structural reforms to bring down its swollen deficit from 8.9 percent of its €1.07 trillion ($1.31 trillion) gross domestic product to below 3 percent by the end of 2014.

Market pressure on Spain resumed Friday with the interest rate on Spain's key 10-year bonds down 0.2 percentage points to 6.7 percent.

The bond rate, or yield, fell away from the 7 percent barrier Thursday within minutes of European Central Bank chairman Mario Draghi telling an audience of business leaders in London that the bank would do whatever was necessary to save the euro. A rate of 7 percent is deemed untenable over the long term and Spain has been suffering it for several weeks.

Investors fear that if Spain were to need a full rescue - like Greece, Ireland and Portugal - this could seriously challenge the bloc's financial system and the single euro currency itself. Spain has been pleading with the ECB to intervene by showing support for Spain and equally troubled Italy by buying up bonds to bring down the interest rate.

The country's benchmark Ibex 35 stock index was up almost 1 percent at 6,380 after a mixed morning.

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