According to the latest estimates released Wednesday, the Bank of Spain announced that the Spanish economy contracted by 1.8 per cent in the first quarter, the highest rate in the European Union.

The Bank of Spain stated that the country’s GDP shrank by 2.9 per over the previous 12 months. Final figures will be released in May by the National Statistics Institute.

The Spanish economy is currently in freefall with unemployment rate soaring to 17.4 per cent in the first quarter from 14 per cent in the previous quarter, making it the highest unemployment rate level in over ten years.

The Bank of Spain estimates the economy will contract by 3.0 percent this year, almost double the figure of 1.6 percent given by the Socialist government in January, and by a further 1.0 percent in 2010.