Spanish unemployment drops after two year rise as business looks up

Thu Jul 25, 2013 8:04am EDT
 
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By Paul Day and Sarah White

MADRID (Reuters) - Spain's unemployment rate fell for the first time in two years and some of the country's biggest firms said on Thursday business was looking up, boosting the government's claim the economy is climbing out of recession.

The dip in the jobless figures - to 26.3 percent in the second quarter from 27.2 percent in the first - nonetheless highlighted how far the country still needs to travel on the road to full recovery. Economy Minister Luis de Guindos called the size of the figures "totally unacceptable".

Spain is one of the euro zone's troubled economies, subject to a bank bail out after a housing bubble burst. But it is far stronger than others such as neighbor Portugal or Greece.

Jobs have been the main issue. The unemployment rate has risen relentlessly since 2011, with some 3.8 million people joining the jobless lines since the first quarter of 2008, the year the global financial crisis erupted and property prices collapsed.

The real estate meltdown left the country's banks heavily exposed to soured assets and loans, which have since weighed on their balance sheets and soaked up 42 billion euros ($55.59 billion) of European Union aid.

On Thursday, three banks including bailed out lender Bankia, reported bad debts were still rising. But they also posted big jumps in first-half profits, on lower writedowns on property assets and trading gains.

Telecoms firms Telefonica and oil major Repsol - two heavyweight Spanish firms with more exposure to foreign economies - also gave encouraging trading updates.

Supported by a central bank report earlier this week showing Spain's economy came close to stabilizing in the second quarter, Thursday's run of encouraging news added weight to Prime Minister Mariano Rajoy's belief the economy should exit its two-year recession as soon as the current quarter.   Continued...

 
People stand in a government-run employment office in Madrid July 25, 2013. REUTERS/Juan Medina