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Protesters show banners reading " No cuts", "dignify the jobs" and "right to free justice" to demonstrate against the country's near 25 per cent unemployment rate and stinging austerity measures introduced by the government, in Madrid, Spain, Saturday, July 21, 2012.Andres Kudacki/The Associated Press

Spanish unemployment has hit the highest level since the country's transition to democracy following the Franco dictatorship, as austerity measures taken by a government battling to reduce its budget deficit show little sign of reversing a deepening recession.

Unemployment in Spain rose to 24.6 per cent in the second quarter of the year, according to official statistics, up from 24.4 per cent in the first three months and the highest level since records began in 1976, the year after General Franco died.

The data showing 5.7 million Spaniards out of work comes as Mariano Rajoy's centre right Popular Party government faces increasing opposition from public sector employees facing pay cuts as part of a €65bn package of tax increases and spending cuts announced this month.

His seven-month old government, which enacted a sweeping overhaul of Spain's labour market after taking office to allow employers to fire workers more easily, has seen its popularity fall, but argues the measures are crucial structural reforms needed to reduce joblessness over the medium term.

Some economists question the accuracy of the data from the INE, Spain's national statistics institute, as it is not seasonally adjusted in an economy where highly seasonal sectors such as tourism and leisure are large employers.

Spain lurched back into recession in the first quarter of this year, its second since 2009, as the country grapples with a painful deleveraging process following a decade-long property bubble that saddled its private sector with high debts.

This had been exacerbated by the country's troubled banking sector, parts of which have needed a €100-billion ($122.7-billion U.S.) European bailout, pulling back from lending as they nurse real estate-related wounds, and starving the economy of credit.

At the same time Madrid has appeared to have lost the confidence of the international bond market it needs to borrow money from, with the level of interest Spain pays to borrow for 10 years compared to Germany having risen to the highest level since the start of the euro.

Mr. Rajoy's government on Thursday faced uncomfortable testimony in Spain's parliament from Elena Salgado, finance minister under the country's previous socialist government. She has accused the prime minister of having known Madrid was going to overshoot previously-agreed budget deficit targets.

Ms. Salgado, who was speaking about the rescue of Bankia, the savings bank, claimed she had informed Mr. Rajoy that Spain was going to miss its targets due to overspending by regional governments – in contradiction to statements by the current government that it was surprised and angered to discover the legacy left to it by the rival socialists.