As the global economic crisis unfolds and countries across the Eurozone are seeing unemployment rise, budget deficits swell up to record highs and governemnt leaders proposing bailout packages for banks and other industries, Spain is hit hard by the European Commission as well as Standard & Poor’s credit rating agency.

The European Commission reveals gloomier forecasts for Spain than the Spanish government. While Solbes announced a 1.6 decrease in GDP output, the EC predicts a contraction of 2% as well as a huge surge in unemployment, up to nearly 19% as well as an increase in public deficit to 4%. Spain finance minister, Pedro Solbes, once again denied such a scenario claiming that the economy will see growth again in 2010. I’m sure the 40+ million citizens of Spain would be keen on understanding how exactly Mr. Solbes sees this increase happening.

As of today, the forecasts in all sectors look rather grim; the worst recession in 50 years, automakers halting production and laying off workers, construction companies filing for administration, over 1,000,000 jobs lost last year lone, and banking giants like La Caixa and Caixa Catalunya announcing cost cutting measures, amongst dozens of other not so positive headlines filling the papers every week. Not to mention the housing crisis in this country which is still unfolding. And if the European Commissions latest reports weren’t enough, the S&P downgraded Spain’s triple A status today to an AA+ sovereign credit rating, as the country’s budget deficit increased amidst the first recession in 15 years.

How deep will Spain fall?