SPAIN’S UNEMPLOYMENT RATE has hit a record high with almost one quarter of the workforce currently unemployed, according to the country’s national statistics office.
Just under 5.64 million people – 24.4 per cent of the workforce – are unemployed according to figures released today. The figure is the highest unemployment rate in the eurozone and is expected to rise further this year.
Unemployment rose 1.5 per cent from the final quarter of 2011 – an increase of 365,900 people.
The news comes hours after Spain’s credit rating was downgraded two notches by ratings agency Standard & Poor’s, which warned that the country’s economy is likely to continue to worsen.
S&P cut Spain from A-1 to BBB+ rating and placed the country on negative outlook, meaning further downgrades are likely. The ratings agency also warned that the country would have to take on more debt to support its banking sector.
It is the second time this year that the ratings agency has cut Spain’s debt rating. Spain’s new centre-right government which took office in December has announced a stringent programme of austerity-based reforms aimed to reversing the contracting economy.
S&P said the downgrade reflected the ratings agency’s view of “mounting risks” to Spain’s government debt as a share of GDP along with the contracting economy.
S&P was also critical of the economic situation in the rest of Europe, saying:
In our view, the strategy to manage the European sovereign debt crisis continues to lack effectiveness.
We think credit conditions, and hence the economic outlook for Spain, could now deteriorate further than we anticipated earlier this year unless offsetting eurozone policy measures are implemented to support investor confidence and stabilize capital flows with the rest of the world.
Moody’s ratings agency currently rates Spain at A3 with a negative outlook while Fitch rates the country at A and also with a negative outlook.
The move caps a bad week for Spain: on Monday the country’s central bank confirmed that Spain is back in recession for the second time in three years as the economy contracted by 0.4 per cent in the first three months of the year.