Demonstrators camp out in Madrid's Puerta del Sol May 21, 2011. Spaniards took their protests over sky high unemployment and austerity into a seventh day across the country on Saturday, defying a ban on demonstrations in the run up to local elections on Sunday.

Spaniards take to the streets in protest over sky-high unemployment in Madrid. The jobless rate in Spain hit 24.4 per cent, the highest in the industrialised world, in the first quarter of this year. Photo: Reuters

SPANISH leaders have warned that their country is mired in a ''crisis of huge proportions'' as the government reels from the latest downgrade of its credit rating and is faced with record unemployment.

The jobless rate in the eurozone's fourth-largest economy hit 24.4 per cent, the highest in the industrialised world, in the first quarter of this year, signalling one in four Spanish workers is jobless. Among under-25s, the rate climbed to 52 per cent.

At least 1.7 million households now have no wage earner, an increase of almost 10 per cent since the start of the year.

Retail figures for last month showed sales fell for a 21st consecutive month as the country's recession bit down on consumer spending.

''The figures are terrible for everyone and terrible for the government,'' Jose Manuel Garcia-Margallo, the Foreign Affairs Minister, said. ''Spain is in a crisis of huge proportions.''

The gloomy figures piled pressure on Madrid after Spain's government debt was downgraded by Standard& Poor's, one of the triumvirate of global credit-rating agencies. The country's rating was cut by two notches from A to BBB+ with a negative outlook late last week, reflecting a loss of confidence in its ability to shoulder its national debts.

The tide of bad economic data from Spain is fuelling worries that the country will follow Greece, Ireland and Portugal into requiring an international bailout.

S&P said it did not expect Spain to default on its debt repayments. Nonetheless the yields, or implied interest rates, on 10-year Spanish government bonds surged to 6 per cent, seen as a psychologically important barrier for the markets, before falling slightly to the 5.9 per cent mark.

Spain is also faced with a fragile banking sector. Central bankers in Madrid said the country's lenders were saddled with problem property loans which totalled €184 billion ($234 billion), about 60 per cent of their property portfolios.

S&P sees ''an increasing likelihood that Spain's government will need to provide further fiscal support to the banking sector''.

Telegraph, London