Spain unemployment over 27%

The number of jobless rose to more than six million for the first time, climbing to 27.2% of the workforce, compared with 26.02% in the previous three months, the National Statistics Institute in Madrid said on Thursday. That was more than the 26.5% median forecast of eight economists surveyed by Bloomberg.

In power since December 2011, Prime Minister Mariano Rajoy will unveil on Friday fiscal and policy measures aimed at halting a six-year slump in the euro region's fourth-largest economy. Spain's recession dragged into a seventh quarter in the first three months of 2013, leaving the country with more than a fifth of all jobless people in the EU.

The International Monetary Fund last week cut its 2013 forecast for Spain's growth to a 1.6% contraction from 1.5% and said unemployment will peak at 27% this year.

The jobless number is the highest since at least 1976, the year after dictator Francisco Franco's death heralded Spain’s transition to democracy. Spain's fourth-largest builder Fomento de Construcciones & Contratas may fire 9.7% of its 1,500 garbage collectors amid slower activity, Europa Press reported this month. FCC already is negotiating with unions to eliminate 17.5% of jobs in its construction branch, it said.

No Improvement

"There is no real sign of a fundamental improvement in Spain's underlying economic performance," said Jonathan Loynes, chief European economist at Capital Economics Ltd in London, in a telephone interview. "If anything, things look worse now than they did when bond yields rose to dangerously high levels last summer."

The yield on Spain's 10-year bonds on Wednesday dropped as low as 4.215%, the least since November 2011, compared with a euro-era high of 7.75%  in July, before European Central Bank President Mario Draghi pledged to "do what it takes" to hold the euro together.

Comments by a German Finance Ministry official on Wednesday suggested a softening of Chancellor Angela Merkel's austerity- first policy, after European Commission President Jose Manuel Barroso said the path of austerity has reached its limits.

Rajoy is hoping to convince investors and EU peers that the country may return to growth next year and eventually stop a surge in its public debt load if the European Commission agrees to ease Spain’s deficit targets next month.

European policy makers gathering in Washington last week for the World Bank and IMF's spring meetings said they were conscious of the danger after IMF Managing Director Christine Lagarde warned against "up-front, heavily loaded fiscal consolidation."

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Writer: Bloomberg News
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