More than six million Spaniards are now out of work, raising the jobless rate to 27.2 per cent - the highest since records began in the 1970s.
The huge sums poured into the global financial system by major central banks have eased bond market pressure on Spain, but the cuts Madrid has made in spending to regain investors' confidence have left it deep in recession.
Unemployment - 6.2 million in the first quarter - has been rising for seven quarters and the latest numbers will fuel a growing debate on whether to ease off on the budget austerity which has dominated Europe's response to the debt crisis.
Rising: People enter an office to register for job placement in Madrid. More than six million Spaniards were out of work in the first quarter of this year
Crisis: Six million Spaniards are now out of work as unemployment hits 27.2 per cent - the highest on record
'These figures are worse than expected and highlight the serious situation of the Spanish economy as well as the shocking decoupling between the real and the financial economy,' strategist at Citi in Madrid Jose Luis Martinez said.
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The collapse of a property boom driven by cheap credit has seen millions in the construction sector laid off since 2009 and private service sector, worth almost half gross domestic product, has followed as Spaniards tightened purse strings and investment plummeted..
Laid off: The collapse of a property boom driven by cheap credit has seen millions in the construction sector laid off since 2009
Future: Prime Minister Mariano Rajoy said that a new reform plan would not include more austerity measures
The malaise has been made worse by billions of euros in state spending cuts and tax hikes to reduce one of the euro zone's highest deficits and convince nervous markets Spain can control its finances.
Spain and Italy's costs of borrowing hit their lowest in more than two years this week and EU officials have begun to talk openly of easing up on deficit targets.
Prime Minister Mariano Rajoy said earlier this week that a new reform plan, to be announced on Friday, would not include more austerity measures in an effort to calm increasingly desperate Spaniards and reassure investors the country will soon be able to grow.
Protests have become commonplace across the country and thousands of police have been drafted in to Madrid to handle a march on Parliament on Thursday.
But few believe the government's plans will be ambitious enough to restart the ailing economy and create jobs.
The International Monetary Fund sees Spanish unemployment at 26.5 percent next year