28 Jul 2012

Spain in unprecedented double-dip recession

5:56 am on 28 July 2012

The International Monetary Fund says Spain is in an unprecedented double-dip recession and the outlook for the country remains very difficult.

Its annual report on the Spanish economy praised Madrid's "decisive action on many fronts", but warned further reforms were needed.

The report comes as figures show Spanish unemployment hitting a fresh high.

The BBC reports almost 5.7 million Spaniards are now out of work, with the jobless rate reaching just under 25% during the April to June quarter - the highest since the 1970s.

Spain's borrowing costs on the secondary market - seen as a good indicator of investor confidence in the country - jumped above 7% earlier this week, a level widely seen as unsustainable.

This raised fears Spain may soon be forced to seek a full bailout from its European partners. The EU has already agreed to 100bn euro loan package to help recapitalise the country's highly indebted banks.

However, the borrowing costs, or yields, fell back on Thursday after the head of the European Central Bank (ECB), Mario Draghi, said the bank would do "whatever it takes" to preserve the single currency.

On Friday, Spain said it was not seeking a bailout from the EU.