Eurozone crisis: German unemployment hits as Greece warns over euro exit

Bad news for one of Europe's weaker economies - Spain's unemployment level has hit a new record high.

In a sign of the challenge facing the new Spanish government, the number of people registered as 'out of work' hit 4.42 million at the end of December. That's the highest level since they first started collecting the figures in 1996, and will push the unemployment rate further above 22%.

Spain's labour ministry blamed the country's weakening economy for the increase:

The figures for the number of registered unemployed for the month of December confirm the deterioration of the economic situation during the second half of the year.

This is the second blow to hit Spain in four days – last Friday, it was announced that the Spanish deficit for 2011 will be larger than the official target of 6% of GDP, and could hit 8%.

Mariano Rajoy's new administration also unveiled €8.9bn of spending cuts and €6bn of tax rises designed to cut the deficit – but the plan is unlikely to help with Spain's huge unemployment crisis.

Pressure is building again today in Greece, the most troubled member of the eurozone.

Government spokesman Pantelis Kapsis warned this morning that Greece could be forced out of the eurozone unless it can agree the details of its second rescue package, worth €130bn. Kapsis told Skai TV that:

The bailout agreement needs to be signed otherwise we will be out of the markets, out of the euro...The situation will be much worse.

That €130bn package was agreed in principle last October, at an EU summit in Brussels. Nearly 10 weeks later, the Greek government still hasn't agreed its side of the deal – yet more austerity cutbacks, and a debt-swap deal with its creditors.

Kapsis warned that "The next three to fourth months are the most crucial."

People walk past a ramshackle shop in central Athens. Photograph: Orestis Panagiotou/EPA

The immediate priority is to hammer out a deal with Greece's debt-holders. The original plan was for a 50% haircut, but IMF officials are now indicating that this may not be enough to repair Greece's finances.

National Bank of Greece president Vassilis Rapanos has also warned that Greeks must either lower their standard of living, or quit the euro and turn the clock back by decades

Rapanos told an audience at the Athens Stock Exchange that the first quarter of 2012 will be decisive for the country, as he conducted the traditional cutting of the New Year cake.

The Guardian