Spanish unemployment rose to the highest on record after Prime Minister Mariano Rajoy made it easier to fire workers while implementing the steepest budget cuts in the country’s recent democratic history.
Unemployment, already the highest in the European Union, rose to 24.6 percent in the second quarter from 24.4 percent in the prior three months, the National Statistics Institute said in Madrid today. That was the largest proportion since at least 1976, the year after dictator Francisco Franco died, prompting the transition to democracy. The median forecast in a Bloomberg survey of nine economists was 24.7 percent.
The Bank of Spain said this week that the nation’s recession deepened in the second quarter as the government intensified efforts to reduce a budget deficit almost as large as Greece’s. Spanish ministers are focusing on reducing the nation’s debt burden while arguing that the euro area’s monetary policy isn’t helping them to revive its fourth-largest economy.
“We are pessimistic,” said Jose Antonio Herce, a Madrid- based economist at Analistas Financieros Internacionales. “There is every reason to believe activity will contract 2 percent this year and push unemployment to 26 percent.”
Rajoy’s seven-month-old People’s Party government last week gave up on its forecast for the economy to return to expansion next year, replacing a 0.2 percent growth estimate with a prediction for a 0.5 percent contraction. Officials anticipate the economy will shrink 1.5 percent this year while unemployment will peak at 24.6 percent.
Bloomberg
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