MercoPress. South Atlantic News Agency

Spain hits new unemployment record; crackdown on the black economy

Prime Minister Jose Luis Rodriguez Zapatero: ‘we have made mistakes’

Weak jobs data, sliding retail sales and rising inflation confirm Spain’s economic recovery is faltering. The official figures released Friday showed 21.3% of the workforce without a job, up from 20.3% at the end of last year.

This is a 14 year high and means over 4.9 million Spaniards are out of a job, according to Spain’s National Statistics Institute.

The country’s unemployment rate is Europe’s highest and getting worse but the Madrid government is not convinced all those people really are jobless and on Friday it launched a crackdown on the black economy, with increased fines for companies that pay workers under the counter to avoid tax and social security.

Spain’s tax inspectors’ union estimates undeclared earnings amount to 82 billion euros a year.

Commenting on the latest figures, Spanish Labour Minister Valeriano Gomez said: “With an unemployment total of over 4.9 million and a jobless rate exceeding 20% there is no government that would be happy with the current situation.”

At the same time it was revealed that retail sales in Spain fell 8.6% year-on-year in March and inflation hit 3.5% in April.

The government, struggling with the Euro zone’s third largest deficit, is hoping the crackdown on the underground economy, with bigger fines and more inspections will raise billions.

According to the monthly report all major sectors: industry, construction, services and agriculture shed jobs during the quarter, which means the number of Spanish households in which no adult had a job increased by 58,000, to a new total of 1.38 million, the government said.

Earlier this month, embattled Socialist Prime Minister Jose Luis Rodriguez Zapatero announced he would not seek a third term. Elections are due by March 2012. For months Rodriguez Zapatero's Socialists have trailed in opinion polls behind the main opposition conservative Popular Party.

In announcing his decision on April 2 to Socialist Party leaders Rodriguez Zapatero said, “We have made mistakes.”

He added that “recent months have been very difficult for the work of the government” because even after enacting a budget austerity plan to reduce the public deficit that put Spain under pressure from international financial markets, the destruction of jobs continued.

Local elections in all Spanish cities and for 13 of its 17 regional parliaments will be held May 22. They are widely seen as a bellwether of voter sentiment for the general elections to follow