MADRID: Spain's jobs-scarce economy shrank 0.1 percent in 2010 as the government slashed spending to avert an Irish-style debt crisis, provisional data showed Friday.
The economy fared better than the government's grim forecast for a 0.3-percent decline but even as the figures turned positive again late in the year, there was still not enough growth to make any impression on the country's massive jobless queues.
Spain finished 2010 with the highest unemployment rate in the industrialised world at 20.33 percent.
In the fourth quarter of 2010 alone, GDP edged up 0.2 percent, the National Statistics Institute (INE) said.
The Spanish economy slumped into recession during the second half of 2008 as the global financial meltdown compounded the collapse of the once-booming property market.
It emerged with meagre growth rates in the first half -- 0.1 percent in the first quarter and 0.2 percent in the second -- before going into neutral in the three months to September.
Prime Minister Jose Luis Rodriguez Zapatero's Socialist government anticipates only a moderate improvement this year, with 1.3-percent growth and a jobless rate still scaling dizzying heights at 19.3 percent.
On Friday, the government approved what it called a "shock plan" to curb unemployment, including financial help to companies to hire people under 30 and for the long-term jobless.
Spain's major challenge has been to avert the debt quagmire that forced Greece and Ireland to accept European Union-IMF economic and financial rescues last year.
As the European Union's fifth-biggest economy, a rescue for Spain would dwarf previous debt crises in the bloc and force a re-think of the entire eurozone rescue mechanism.
The government has cut spending, announced sell-offs and reformed the labour code and pension system in an all-out battle to regain the confidence of investors on whom it depends to finance its debt.
Spain's public deficit soared to the equivalent of 11.1 percent of GDP in 2009, the third-highest in the eurozone after bailed-out Greece and Ireland.
It aims to curb the public deficit to below the European Union limit of 3.0 percent of GDP by 2013.
Major reforms announced in the past year included:
-- An average cut to public workers' pay of five percent.
-- Plans to sell stakes in the national lottery and the country's main airport operator.
-- Retirement age to be raised from 65 to 67.
-- Labour market reforms to make it cheaper to fire workers and easier to reduce working hours and staff levels in downturns.
-- Stricter new rules introduced on the levels of rock-solid core capital banks must hold on their balance sheets.
The final verdict on Spain's efforts may come from the markets and the rates they demand in return for financing the debt.
The latest bond auctions showed a slight easing in yields as investors apparently took heart at Madrid's reform programme.
Spain's central and regional governments and its banks combined need to raise about 290 billion euros ($390 billion) in gross debt including rollovers in 2011, according to Moody's Investors Service.
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