Spain fell deeper into recession in the third quarter of 2012, new figures published on Tuesday show.
The news is likely to pile further pressure on Prime Minister Mariano Rajoy’s government as it seeks to revive the country’s lacklustre economy.
Consumer prices also jumped by 3.5 percent.
Spanish GDP has now dropped for the fifth time in succession, falling 0.3% in the third quarter of this year.
It adds to evidence the eurozone’s fourth largest economy is trapped in a ‘stagflationary’ spiral of shrinking growth, high inflation and high unemployment.
Recent budget measures aim to cut the public deficit by sixty billion euros by the end of 2014.
For the moment, however, the cuts appear to be backfiring, denting investment and killing consumer spending.
Prime Minister Rajoy has so far resisted calls for Spain to ask for a bailout, leading to civil unrest.