While one out of every four Spaniards are unemployed, the rate for job-seekers under 25 stands at 52 percent. Emigration by young adults is on the rise, and companies are taking advantage of new labor reforms that make it cheaper to fire workers. The country is in its second recession in three years.
Just as Valencia was announcing its financing needs last Friday, Spain's finance minister revealed that the economic contraction will be deeper than expected in 2013 - meaning an even longer period of economic pain before Spain can hope to start generating jobs again.
For this year, the government expects a smaller contraction than previously forecast of 1.5 percent, down from a previous estimate of 1.7. However, instead of economic growth of 0.2 percent for next year, the government now forecasts a contraction of 0.5 percent.
BANK BAILOUT WORRIES
The concerns circling Spain's shaky banks intensified in May when Bankia, the country's fifth-largest lender, unexpectedly announced it would need (EURO)19 billion to cover its toxic property loans and assets. A month later, leaders of the other 16 countries that use the euro crafted a rescue package of up to (EURO)100 billion for Spain's banks.
Spain still hasn't put a precise figure on how much the banks will need, denying investors a clear picture of the extent of the problem and whether the (EURO)100 billion is enough to handle it. Those numbers won't start coming out until September when extensive audits and stress tests of each bank are finalized.
Friday's announcement by eurozone finance ministers that they had agreed the terms of the bailout hasn't quelled markets. That's because the government is ultimately liable to repay the loans. Europe's financial leaders agreed in principle earlier this month to eventually make loans directly to banks and take the Spanish government out of the equation. But that shift is a long way off - a pan-European banking authority would have to be created first and that could take years.
There is also concern that the rules of the bailout mean that eurozone would have to paid back first before other debt is settled. This could leave less money for private investors.
DEBT DEPENDENCY
The bank bailout has only made investors more worried about Spain's financial position.
Two-thirds of Spain's government bonds are held by the country's banks, pension funds and insurance companies - that's 50 percent higher than last year. This sharp increase is a sure sign that foreign demand for Spanish debt is falling fast.
Market-watchers are concerned that Spain and its banks are dependent on each other: the government is issuing debt, the majority of which is being bought by its banks, only to use the funds from the sale to prop up its banks so that they can buy more government debt.
Spain has so far this year issued (EURO)59 billion in bonds out of a total (EURO)86 billion planned for 2012. But as the banks' condition deteriorates, there is growing concern that they won't be able to buy up much more government debt.
