The Spanish economy continues to struggle with the abysmal growth pace, surging unemployment, frail financial sector, and fiscal imbalances.

The economy ended 2011 with contraction as the GDP fell 0.3% and on the year recorded slim growth of 0.3% according to the figures from the National Statistics Institute that were in line with the estimates published earlier this month from the Bank of Spain.

We can surely see the struggling economy faltering again into recession and the Bank of Spain also printed a bleak outlook expecting the nation to contract 1.5% this year and joblessness to surge to 23.4% if the government is to meet its austerity goals.

The IMF also predicts that the economy will contract 1.7% this year and also contract in 2013 by 0.3% and the weak growth will also push the government plans off track and deviate from the budget targets of 4.4% deficit this year and 3.0% in 2013 as the IMF expects the deficit to GDP this year of 6.8% and next at 6.3% far from the target set by the government.

The new government is facing a tough task with the fiscal problems, weak growth and highest unemployment in the EU to kick start growth and meet its deficit reduction targets while facing off the challenge from the market that foresees Spain a possible victim that might need support to overcome the crisis.