UNEMPLOYMENT HITS NEW HIGH

The unemployment rate rose sharply to 9.6% in the first three months of 2008, a three-year peak and the second highest rate in the EU. The jobless total increased from 8.6% in the fourth quarter of last year, with the construction industry bearing the brunt of job losses. The rise came as the government cut its growth forecasts for 2008 and 2009. The bleak figures confirm a downturn in what had been one of Europe’s economic success stories. Spain’s jobless rate is now second only to Slovakia among the 27 EU nations. The newly re-elected Socialist government expects the Spanish economy to grow 2.3% in 2008 and 2009 from a previous estimate of 3.1% and 3.0%. It has also forecast that unemployment could rise as high as 10% in 2009. This brings official predictions into line with estimates from private sector economists. In particular, building activity in Spain has tailed off amid higher interest rates and tighter lending conditions. An analyst at Bank of America said: “The downturn is spreading very rapidly from the construction sector to all sectors of the economy, and it is happening more quickly than expected.”

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