Spain's job woes continue as tourism season starts

Spain's registered unemployment in May fell less compared with the same period last year as a deepening recession in the eurozone's fourth-largest economy damped hiring in the run up to the country's peak tourism season.

The number of people registering for unemployment benefits fell by 30,113 from April to 4.71 million, less than half the 79,701 drop in the same month last year, data released by the Labor Ministry in Madrid showed. The figure is the worst for a month of May since the start of the crisis in 2008.

Tourism is the biggest contributor to the country's economy, and any slowdown in hiring, at a time when unemployment already tops 24 percent, will make it more difficult for the government to meet its pledge to slash its deficit by more than half this year.

Growing investor concern about Spain's public finances and the need to shore up the banking system has fueled speculation the country will be the next to need a bailout.

"Even seasonal hiring is becoming difficult for cash-strapped Spanish companies," said Thibault Mercier, an economist at BNP Paribas SA in Paris.

The data adds to signs of weakening activity in the eurozone after average unemployment in the 17 countries last week reached 11 percent in April, he said.

US index futures and European stocks retreated, with the Stoxx Europe 600 Index down 0.3 percent to 234.45 at 12:15 pm in London.

The benchmark measure has declined almost 14 percent from this year's high on March 16 amid growing concern that Greece will be forced to leave the euro currency union. Standard & Poor's 500 Index futures expiring in June lost 0.6 percent.

Spanish Prime Minister Mariano Rajoy's government on Monday repeated it isn't under pressure from European allies to seek a bailout to recapitalize banks.

The mounting cost of provisions against bad real estate loans and other credits has prompted Spanish debt to fall as investors doubt Rajoy can tackle a budget deficit similar to that of Greece.

Spain's 10-year bond yield reached a six-month high on 6.7 percent on Wednesday. The yield fell 4 basis points on Monday to 6.49 percent at 11:10 am London-time after the Wall Street Journal reported Germany may be willing to lift its objections to common eurozone bonds or mutual support for European banks.

Newspaper El Pais also reported the country is negotiating EU aid for its banking system that wouldn't be considered a bailout.

A spokeswoman for the prime minister's office, who denied to be identified in line with government policy, said that she had no knowledge of such talks and repeated that Spain is under no pressure from European partners to seek a bailout.

Spain slipped into its second recession since 2009 in the first quarter and the economy is set to contract further in the three months through June even as the surplus of the nation's balance of tourism and travel services increased in the first three months of the year, according to the Bank of Spain.

The fallout from Europe's debt crisis is weighing on the economic outlook, the Germany-based Sentix research institute said on Monday. European investor confidence dropped to the lowest level in more than three years in June.

Bloomberg News in Madrid

(China Daily 06/05/2012 page17)