Rajoy -- "The context could not be darker".
MADRID: Spain will release its key economic data for last year in the coming days which is expected to show the jobless rate, already Europe's highest, hitting a new high while economic growth slowed.
The country has swung between recession and sluggish growth, and the number of unemployed has risen steadily, since the global financial crisis hastened the collapse of its once-buoyant property sector at the end of 2008.
"The context could not be darker", new right-leaning Prime Minister Mariano Rajoy warned in a speech to parliament ahead of his investiture in December.
The national statistics office will release figures for the number of people out of work as of the end of 2011 and Rajoy has already warned that the figure will surpass five million, a psychological barrier that the previous Socialist government had once insisted would never be reached.
He said the figure will come in near the astronomical level of 5.4 million, which would imply an unemployment rate of around 23 per cent -- the highest level in the developed world and double the European average.
The Bank of Spain predicts the unemployment rate will probably be higher than the 21.5 per cent reached at the end of the third quarter of 2011 as the prolonged economic crisis continues to squeeze the nation.
"The third quarter was especially bad and the expectations for the fourth quarter are similar," said Raul Ramos, economics professor at the University of Barcelona.
Government spending cuts to public services aimed at reining in Spain's deficit had fueled job losses during the second half of last year, he said.
"In some sectors like education and health, during the third and fourth quarter, greater pressure was put on fiscal consolidation programmes which has led to a significant loss of jobs in the public sector," said Ramos.
Spain's northeastern region of Catalonia slashed one billion euros ($1.3 billion), or 10 per cent of the total, from its health budget while the regions of Madrid and Valencia have cut spending in education, sparking street protests.
Even as they welcome this budget discipline, the Bank of Spain as well as the European Union and the International Monetary Fund have all expressed concern over Spain's sky-high unemployment rate and have urged the government to reform the country's labour laws as soon as possible.
"Spain is very prone to destroying jobs and finds it very difficult to create them," said Gayle Allard, an economist at Madrid's IE Business School.
The rigidity of rules regarding collective bargaining and the hiring and firing of workers was at the root of all of the problems of Spain's economy, she added.
"According to my calculations the unemployment rate at the end of this year will be around 24.2-24.3 per cent unless there is a reform of the labour market," said Allard.
The national statistics office will on Monday publish gross domestic data figures for 2011 that are expected to confirm that Spain is heading back into recession.
The Bank of Spain predicted Monday that the Spanish economy, the eurozone's fourth largest, grew by just 0.7 per cent in 2011 after shrinking 0.1 per cent in 2010 and by 3.7 per cent in 2009.
It predicts the economy will shrink by 1.5 per cent this year before making a modest rebound in 2013 with growth of 0.2 per cent.
In its previous economic bulletin released in March 2011 it had predicted the economy would expand by 1.5 per cent this year.
"Austerity can't be the only policy. It is good to try to fight the deficit but we have to think more and more about what we can do to make our economy grow," said Ramos.