Friday, February 23, 2018
Business

Unemployment reaches 24.63 percent in Spain

MADRID — The number of people unemployed in Spain hit a record high, official figures showed Friday, as the International Monetary Fund urged European leaders to quickly fulfill their promises to help the country and the 17-nation eurozone.

Recession-hit Spain's unemployment rate rose to 24.63 percent in the second quarter, up 0.19 percentage points from the previous three months, the National Statistics Institute said. The institute said 53,500 more people joined the ranks of the jobless between April and June, making for a total of 5.69 million people out of work.

For those younger than 25, the unemployment rate climbed to 53 percent from 52 percent in the previous quarter.

Spain is battling to avoid having to seek a full-blown financial bailout as it struggles to emerge from its second recession in three years and strives to convince investors it can manage its finances.

The government is adamant it won't need help.

"No rescue is going to be sought; the idea of a rescue is discarded," Deputy Prime Minister Soraya Saenz de Santamaria said.

Spain has asked for as much as $123 billion in loans for its banks, which are laden with soured investments after a property sector collapse in 2008. A sovereign bailout for Spain, which has a $1.23 trillion economy, would be far larger.

The IMF, which has been involved in bailing out other European countries in recent years, said European leaders needed to complete reforms and fix the flaws in the euro monetary union.

"The problems that Spain faces in the financial markets go beyond the country's borders, and speak to the design flaws in the eurozone," said James Daniel, IMF mission chief for Spain.

One of the measures that European leaders promised — and that would help Spain — is to create a European banking authority that could give rescue loans directly to banks. Under Spain's current deal, the government is ultimately liable for the banks' rescue loans.

But setting up a Europewide banking regulator could take months or years.

Besides the banks, Spain's regional governments are also in financial trouble. Many of the 17 semiautonomous regions are so heavily in debt that they cannot raise money on their own on financial markets. Two regional governments have already said they will tap a $22.1 billion federal emergency credit line.

Fears that the central government could be overwhelmed by the cost of saving its banks and regions pushed its borrowing rates on bond markets to unsustainable highs earlier this week.

Those borrowing rates fell back down Thursday and Friday, however, after European Central Bank chairman Mario Draghi told business leaders in London that the bank would do whatever was necessary to save the euro.

The benchmark 10-year bond yield fell 0.17 percentage points to 6.73 percent on Friday.

A rate of 7 percent is deemed untenable over the long term, and Spain has been suffering it for several weeks.

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