This Time, Spain Won't Be Back In 10 Minutes

As euro zone unemployment skyrockets to its highest level since the creation of the alliance, Madrid, still reeling from Standard & Poor's downgrade of its government debt last week, got another blow: Spain's unemployment rate hit the roof at 5.64 million, or 24.4 percent, the highest in 18 years among industrialized nations, the national statistics agency said on Monday.

Among people below the age of 25, 52 percent were found to be unemployed in both Greece and Spain, compared to 7.9 percent in Germany and 8.3 percent in Austria. Greece's youth unemployment data are from March.

The figures are terrible for everyone and terrible for the government, Spain's Foreign Minister Jose Manuel Garcia-Margallo told The Telegraph in a recent interview. Spain is in a crisis of huge proportions.

That's not all. The Spanish government may soon lay off public sector workers and civil servants too.

With the possibility of a national bailout looming, Spain may be hurtling into the same canyon as Greece, economists say.

Prime Minister Marianno Rajoy, whose conservative Popular Party ousted Jose Luis Rodriguez Zapatero's Socialists last November, is under fire from workers and unions for introducing dramatic spending cuts and announcing labor market reforms aimed at paring back severance pay and curtailing inflation-linked salary rises in hopes that the country's economic weaknesses will abate.   

Rajoy's fiscal austerity program, while intending to help the government shoulder its mounting debt levels and meet its EU-agreed deficit targets, is worsening Spain's economic contraction, economists say. Some of them add that the government won't be able to meet its deficit and growth targets this year. Spain's economy could contract 1.5 percent in 2012, S&P officials said.

In Spain, 1.7 million families have no breadwinner -- an increase of almost 10 percent since the start of the year. Unsurprisingly, consumer spending levels in Spain plummeted for the 21st consecutive month.

Unemployment levels in Spain have risen steeply from April 2007, when it was 7.9 percent. They are expected to shoot up even further this year, analysts say.

The lowest jobless rates were recorded in Austria (4.1 percent), followed by the Netherlands (5.1 percent), Luxembourg (5.4 percent) and Germany (5.6 percent).

Differences in the political ideologies of different European nations are deepening the economic crisis across the EU, economists say. While the Spanish government is angering the public with its fiscal austerity measures, the French Socialist government, under the aegis of Francois Hollande, is scrambling to avoid austerity and raise €33 billion (US $41.6 billion) to meet the country's EU deficit targets. Meanwhile, Italy's technocratic government, under the leadership of Mario Monti, is foundering in the vortex of a fragmented labor market, rising bond yields and waning investor confidence in the country's ability to refinance its debts. Meanwhile, German Chancellor Angela Merkel is holding the reins of the euro currency union.

With an additional 88,000 people losing their jobs in May, the jobless rate across single-currency euro regions, including Belgium, Germany, Greece, Spain, France and Italy, escalated to 11.1 percent, seasonally adjusted, at the end of the month, from 10 percent during the same period last year, according to data from Eurostat released on Monday. Jobless levels across the wider EU rose to 10.3 percent in May from 9.5 percent in the year-earlier period. This rise brings the number of unemployed euro residents to nearly 18 million.

The situation is bleakest for Europeans who are leaving their teenage years behind and stepping into the threshold of adulthood. An additional 282,000 young people have lost their jobs across the EU, with 90 percent out of work in the euro zone, compared to a year ago. Youth unemployment has risen to 22.7 percent across the EU and 22.6 percent within the euro zone.

Across the EU, nearly 5.52 million young people are languishing without jobs, with about 62 percent in the euro area.

Despite the grim employment data, European stocks mainly rose on Monday in the face of optimism among investors, following the outcome of the European leaders' summit last week. The Stoxx Europe 600 Price Index rose 1.3 percent to 254.49, its highest level since early May. The index has gained more than 4 percent this year.