* Unemployment rate edges up from 24.6 pct in Q2
* Analyst says could hit 26 pct in 2013
* Austerity and recession seen creating more jobless
MADRID, Oct 26 (Reuters) - Spain's unemployment rate hit a
record high in the third quarter, with one in four out of work
and more expected to lose their jobs in 2013 as the next phase
of government cutbacks kicks in.
At exactly 25 percent, Friday's official number was the
highest since the Franco dictatorship ended in the mid-1970s,
and gives fresh impetus to calls by labour unions for a general
strike next month.
That action is part of an increasingly vocal protest
campaign against successive waves of spending cuts and tax hikes
that, critics argue, has only served to put more people out of
work rather than getting to grips with Spain's economic crisis.
"Weaker growth than expected, coupled with austerity, could
easily see unemployment hit 26 percent next year," said Silvio
Peruzzo, economist at Nomura in London.
The rate was 24.6 percent in the second quarter, and
analysts had expected Friday's National Statistics Institute
data to show a rise to 25.1 percent.
The number out of work stood at 5.8 million.
Of European Union countries only Greece, mired in an even
more brutal recession than Spain and battling to stave off
bankruptcy, has a higher jobless rate.
MORE PRESSURE
Friday's data puts further pressure on the government as it
debates whether to seek international aid while it battles to
bring down the public deficit in line with European Union
demands in a recession that shows no sign of letting up.
Government forecasts show the economy contracting next year
by 0.5 percent, but economists in a Reuters poll this week said
they expect it to shrink three times faster.
"There is a debate over the optimistic growth outlook for
next year by the government, which is given little credibility,"
Nomura's Peruzzo said.
Spain's financing needs are largely covered for this year,
and its cost of borrowing from debt markets has eased
significantly since August thanks to the European Central Bank's
promise to buy the country's bonds should it call for financial
help.
Its 10-year bond yields were higher on Friday,
rising around 6 basis points to 5.69 percent.
But austerity measures worth over 60 billion euros ($78
billion) by 2014, are likely to crimp growth further, and cast
more workers out of work.
Meanwhile, labour reforms pushed through this year aimed at
making it easier for companies to hire and fire have encouraged
many to make mass layoffs as demand remains fragile.
MORE TIME ON DEFICIT
The government expects the economy to shrink 1.5 percent
this year, while the official outlook is for the unemployment
rate not to fall below 24 percent until 2014.
Peruzzo said the outlook would only improve if Spain is
granted more time to cut its public deficit, a move that is
backed by the International Monetary Fund to help struggling
euro zone countries.
"I've been out of a job for six months and am looking for
work wherever I can get it," said German Herrero, 42. He said he
lost his job at Vodafone after 12 years of service and had left
his family behind in the eastern city of Albacete to search for
work in the capital.
"If this fails, then I may think of going to England next
year," he said.
The economy slipped back into recession at the end of last
year. The government says 2013 will be the final year of
recession for Spain, a view shared by the euro zone's largest
bank Santander.
On Friday Madrid's transport system slowed to a skeleton
service as workers protested against salary cuts. Protests have
mounted over the past weeks, particularly against cuts to the
country's healthcare system and education.
Some people in work have cause to complain too, going
without paychecks as companies struggle to meet payments, while
others have welcomed early retirement packages in fear of
worsening times ahead.
"I'm happy as I was given early retirement at 55, but the
situation is grim and Germany has the country by the neck," said
Jose Albalt in a wet Madrid on Friday morning. He said he was
offered a retirement package last year when the bank he worked
for was merged with another and 1,200 jobs were lost.
Spain's banking system is undergoing a major restructuring
process after property investments they made during a
decade-long boom soured when the economy began to crash.