Spain's recession worsened dramatically at the end of last year as the government made a final austerity push in order to meet deficit targets imposed by Brussels.

GDP fell by 0.8% over the final quarter of 2012, as state spending was reduced and the public sector continued to shed jobs. The figure contrasted with good news on the deficit, which dropped to 6.7% of GDP from last year's 8.9%. The deficit figure does not include the money Spain borrowed to rescue its banks and is liable to upward revision, but leaves the country just short of its 6.3% deficit target it had been set.

The government claimed the economy had touched bottom and would return to growth this year. Budget minister Cristóbal Montoro pledged that, as Spain tried to meet this year's deficit target of 4.5% of GDP, there would be no more tax rises or spending cuts beyond those already in this year's budget.

According to analysts, Spain's spending plans for this year are based on optimistic growth predictions. Forecasters also believe that Spain's 26% unemployment rate looks set to increase: earlier this week, the European commission predicted 27% unemployment for 2013.