Spain faces more misery despite euro bailout deal

Mariano Rajoy said more Spaniards will lose their jobs in a nation where one in four are already unemployed the day after his economy minister finally asked for a financial lifeline from the EU.

He said the Spanish economy, stuck in its second recession in three years, sparked by a banking crisis, will still contract the previously predicted 1.7 per cent even with the help. “This year is going to be a bad one,” Mr Rajoy said.

Spain on Saturday became the fourth and largest of the 17 nations using the European common currency to request a bailout. Its economy is the fourth biggest after Germany, France and Italy.

A final figure on the bailout will only be available later this month following the completion of two audits.

The cash is expected to come from the eurozone rescue fund, with the International Monetary Fund overseeing the payments but not giving money.

Following the agreement, Mr Osborne issued a stark message to eurozone leaders saying they faced a “moment of truth”. Writing in a national newspaper, he expressed exasperation at the repeated failure to find a permanent solution and said: “The lesson of the last two years is that treating the latest symptom does not cure the underlying conditions.”

Mr Osborne said signs of a solution to the latest bout of uncertainty in the Spanish banking system would not be enough to end the threat to the UK economy.

“Our recovery – already facing powerful headwinds from high oil prices and the debt burden left behind by the boom years – is being killed off by the crisis on our doorstep,” he said. “A resolution of the eurozone crisis would do more than anything else to give our economy a boost.”

Yorkshire businesses were last night urged to hold their nerve. Margaret Wood, chair of the Institute of Directors in Yorkshire, said it was important they remained positive. “They must look forward into emerging markets to ensure Yorkshire has a competitive edge.”

Regional director Kenton Robbins advised firms with Spanish customers or suppliers to strengthen their legal agreements. He said: “I would look to adjust to reduced payment duration, from 30 days to 15 days, for example, and evaluate any risk insurance if you have it.”