Spain is Officially in a Depression

Spain's unemployment has reached 25%, which puts them officially in a depression.

The Madrid research group RR de Acuña & Asociados said the collapse of Spain's building industry will cause the economy to contract for the next three years, with a peak to trough loss of over 11pc of GDP. The grim forecast is starkly at odds with claims by premier Jose Luis Zapatero, who still says Spain's recession will be milder than elsewhere in Europe.

Mr Dannhauser said Spain faces the same sort of boom-bust headache as Britain. The big difference is that Spain cannot let the exchange rate take the strain. "It is going to be very hard for them to sort this out in a currency union."

For the time being, an odd calm prevails across the Iberian peninsular. There are no street riots, even though youth unemployment has reached 38pc. It is hard to imagine anything like the bloody uprising by Asturian miners in 1934, the last time so many people were without jobs.

Local communities have started to issue scrip currency known as "moneda social", based on reflation experiments tried by Austrian cantons in 1932 and more recently by Argentina. Yet few blame the crisis on the effects of the euro. There is a near total backing for EMU, in contrast to France and Germany where a small but vocal minority has never accepted the wisdom of Europe's one-size-fits-all system.