Spanish economy remains in recession

Some 44.5% of under 25s are unemployed in Spain

The Spanish economy shrank by 0.1% in the last three months of 2009, making it the last major economy still in recession.

INE, the national statistics agency, also said the country's gross domestic product had contracted by 3.1% compared with the same period a year before.

Europe's fifth-largest economy has the highest rate of unemployment in the eurozone, hitting 19.5% in December.

For 2009 as a whole, INE said the Spanish economy contracted by 3.6%.

"Unemployment is the greatest problem for the Spanish economy," said Professor Juan Jose Toribio, who is dean of the IESE Business School in Madrid.

"The government is trying to moderate it by bringing in policies to support domestic demand but this has failed at least in terms of creating unemployment."

The Spanish government announced a 50bn euro austerity package, including a civil service hiring freeze, at the end of January.

Economy 'struggling'

The contraction in the Spanish economy in the final quarter of 2009 was not as severe as the 0.3% decline in the third quarter.

And on Wednesday, Spain's Prime Minister Jose Luis Rodriguez Zapatero said the country was close to following other European nations out of recession.

But Ralph Solveen, an analyst with Commerzbank said: "These figures shows the Spanish economy is struggling to catch up with the European monetary union.

"Maybe there's a chance we'll see some positive quarter-on-quarter growth this year. Even so, Spain's economy will continue to remain behind the economies of its eurozone neighbours," he continued

Spain's Socialist government has forecast a return to growth in the second half of this year.

However, the International Monetary Fund expects the economy to contract by 0.6% in 2010, compared with a predicted growth for the 16-nation eurozone of 1.0%.

Spain's public debt is expected to rise from 55.2% of GDP in 2009 to 74.3% in 2012.