Spain says its national debt will spiral sharply higher this year as data showed unemployment hit a record high in March, complicating efforts to stabilise the country's strained finances.
Budget Minister Cristobal Montoro said borrowings of 186.1 billion Euros this year will take the debt-to-GDP ratio to 79.8% from 68.5% in 2011, well above the EU 60% limit.
“Spain is in a critical situation. That is what we're trying to address” he told a news conference after delivering the conservative government's cost-cutting budget for 2012 to parliament.
The country's public debt ratio will still be below the average 90.4% of GDP expected for the entire 17-nation Euro-zone, he added.
But it has grown without interruption since the first quarter of 2008 when, after nearly a decade of fast growth and budget surpluses, the national accumulated debt amounted to just 35.8% of GDP.
Adding to the strain on public finances, the number of people out of work rose for the eighth straight month in March as Spain headed back to recession with the economy expected to shrink 1.7% this year after expanding 0.7% in 2011.
The number of workers registered as without work climbed 0.82 percentage point from February to 4.75 million, the highest figure since the current statistics series began in 1996, the Labour ministry said.
The 2012 budget - approved by the cabinet on Friday - includes 27 billion Euros in tax increases and spending cuts aimed at slashing the annual public deficit to 5.3% of output this year from 8.5% last year.
It closes tax loopholes and rebates for large companies and freezes wages of public sector employees but spares jobless benefits and pensions amid growing public anger at the dire economic situation.
Spain is racing to slash its public deficit to reassure markets that it will not follow Greece, Ireland and Portugal in needing an international bailout after it missed its public deficit target last year.
Spain's unemployment rate, released quarterly by the national statistics institute and which includes registered and unregistered unemployed, stood at 22.85% at the end of 2011 with 5.27 million jobless.
The government expects the jobless rate, already the highest in the industrialised world, to hit 24.3% this year as the economy continues to reel from the collapse of a property boom in 2008.