Spain Unemployment Rate Hits Record 27.16% in First Quarter

Unemployment in Spain jumped to a record 27.2 percent, data showed on Thursday, fuelling a European debate over whether to ditch austerity policies and switch to reviving economic growth. More than 6 million Spaniards were out of work in the first three months of this year, raising the rate in the euro zone's fourth biggest economy to a level unseen since records began in the 1970s.

Joblessness has grown for seven quarters in a row, leaving more Spaniards without work than the entire population of Denmark, and the percentage rate now matches that of Greece, which is in the grips of a full-blown depression. Spain has slipped in an out of recession for the past five years. In the first quarter more businesses and individuals went into bankruptcy and default, further driving up bad loan rates in Spain's troubled banking system and hitting profits at three of the country's top five lenders, Santander , Caixabank and Sabadell. The grim economic picture contrasts sharply with financial markets. 

There, waves of liquidity from around the globe have brought down Spain's borrowing costs and all but banished last year's fears that a budget crisis would force Madrid to seek a international sovereign bailout. "These figures are worse than expected and highlight the serious situation of the Spanish economy as well as the shocking decoupling between the real and the financial economy," strategist at Citi in Madrid Jose Luis Martinez said. On the markets, yields on Spain's 10-year bond fell this week to their lowest level since late 2010. Prime Minister Mariano Rajoy imposed drastic spending cuts and tax increases last year, trying to bring a huge budget deficit under control, in line with the euro zone's policy of fighting its debt crisis with austerity. However, the belt-tightening has aggravated the Spanish economy's problems.