Spain’s employment rate has topped the 25-percent mark

Spain’s employment rate has topped the 25-percent mark for the first time on record, while Prime Minister Mariano Rajoy continues to mull the merits of a second bailout.

According to the National Statistics Institute’s (INE) Active Population Survey (EPA), the number of people out of work on the third quarter jumped by 85,000 to 5.778 million. The economy - in recession for the second time in three years - shed 799,700 jobs over the past 12 months.

The jobless rate rose by 0.38 percentage points to 25.02 percent. That was the first time the rate has stood above 25 percent since the current series of figures was first compiled in 1976. With the economy contracting for the fifth quarter in a row in the period July-September, and expected to shrink 1.5 percent for the year, unemployment is set to continue rising.

Spanish economy shrinks by 0.3 percent in the third quarter

The Spanish economy contracted for the fifth quarter in a row in the period July-September but by slightly less than expected as this summer’s value-added tax hike continued to push inflation higher in October.

According to a flash estimate released Tuesday by the National Statistics Institute (INE), GDP in the third quarter shrank by 0.3 percent from the previous three months. Both the Bank of Spain and the Economy Ministry had predicted a contraction of 0.4 percent, equal to the magnitude of the decline in output in the second quarter.

Labor Minister Fátima Báñez said Monday that the Spanish economy was “emerging from the crisis,” although she produced no data to confirm this impression. The government is still debating whether to seek a bailout from the European Stability Mechanism. This would trigger purchases of sovereign debt by the European Central Bank with a view to lowering the country’s borrowing costs. Prime Minister Mariano Rajoy said Monday he believes a bailout is not “essential” at the moment.

On an annual basis, the fall in activity accelerated to 1.6 percent from 1.3 percent. In the period January-September, GDP shrank 1.2 percent, in line with the government’s prediction of a contraction of 1.5 percent for the full year.

UK Citizens. Access to healthcare: S1

If you are in receipt of a UK State Pension or a long term incapacity benefit and you decide to move to Spain permanently, ask for your S1 (previously E121) from the International Pension Centre (IPC) in Newcastle.

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Rajoy still undecided on bailout

Prime Minister Mariano Rajoy said Friday he had yet to make his mind up on whether to ask for a second bailout to ease Spain’s borrowing costs, and denied he came under pressure to decide at the European Union summit meeting on Thursday in Brussels.

“I have to take this decision as head of the government and it hasn´t been taken,” Rajoy told reporters. “If I have to take it, I will take it.”

Rajoy said it was important that the bailout mechanisms exists. The most likely option for Spain would be to seek a precautionary credit line from the European Stability Mechanism (ESM), which in turn would trigger the purchase of Spanish sovereign debt in the secondary market by the European Central Bank (ECB).

The summit in Brussels postponed creating a pan-European banking union under the sole supervision of ECB that would allow the direct recapitalization of the bloc’s banks until 2014. Both Rajoy and French President François Hollande had called for the union to be in place earlier but German Chancellor Angela Merkel was opposed to this.

Spain shoots up the wealth disparity charts

There has always been a sizeable gap between rich and poor in Spain, but that gap has now become a chasm. Fueled by the crisis and unemployment, Spain has shot to the top of the wealth disparity charts.

The so-called Gini coefficient, which measures a nation's income differential, is a clear indication of this change. If a country scores zero on the scale, it enjoys perfect income harmony; 100 would be complete disparity. Spain received a 34 on its report card, the second-highest score among the 16 EU countries that have so far handed in their data for this year. Only Lithuania, with 35.2, exceeded Spain.

But the Gini is not the only statistic that shows Spain's ill-balanced wealth spread. Eurostat's so-called 80/20 ratio is a gauge of the relation between the 20 percent who earn most and the 20 percent who earn least. In this data Spain broke the record with a 7.5, the highest figure in the EU.

IMF fears Spain’s risk premium may rise to 750 basis points

IMF officials on Tuesday raised concerns about the chance of a renewed spike in Spain and Italy's risk premium if their governments do not trigger intervention by the European Central Bank.

"The issue here is why the yields on Italian and Spanish bonds have come down," the IMF's Chief Economist Olivier Blanchard said during a press conference held in Tokyo on Tuesday. Blanchard suggested that this may have happened because investors are anticipating that their governments would request assistance from the European rescue funds. "If this is the case, we cannot be sure that the yields will remain low," he said.

The director of the IMF's monetary and capital markets department, José Viñals, a former deputy governor of the Bank of Spain, on Tuesday presented a report suggesting Spain's risk premium could hit 750 basis points if the European authorities do not take the right decisions on time.

Spain's risk premium was up 11 basis points from Monday's close at 434 on Tuesday after the IMF revised its estimate for the contraction in the Spanish economy this year by 0.1 points to 1.3 percent, almost triple the government's figure of 0.5 percent. It also predicted Spain would miss its deficit-reduction targets for this year and the next, and forecast the average jobless rate would rise to 25.1 percent when the government expects it to fall.

Labor Minister Fátima Báñez insisted the government's economic forecasts are "credible" and that the economy could start creating jobs at the end of next year.