The International Monetary Fund (IMF) has warned the Spanish Government to continue with its efforts of cutting public spending and reducing unemployment.

Like many other Governments across the globe, Spain is taking steps to reduce the deficit but the IMF warned the economy still faces considerable risks.

In an annual report, the Washington-based Fund said: “The repair of the economy is incomplete and the risks are considerable. Downside risks dominate.”

However, Spain, which is the euro zone’s fifth largest economy, has not been forced to seek a bailout, like other nations such as Greece, Ireland and Portugal.

While the IMF did not say a bailout was likely for Spain, it did say that the Greek debt crisis could destabilise the global financial system and if it is unable to repay its debts, weaker nations like Spain would be affected.

Meanwhile, the Fund warned of the country’s unemployment rate, which at 21% is more than double the euro zone average and the highest rate in the industrialised world.

The country has been hit by a severe slump within its key construction industry, which has led to a significant amount of job losses.

To help bring down the unemployment rate, the Spanish government is continuing to change the countrys labour laws.

Finally, despite the warning, the IMF said Spain is on target to reduce the public deficit from 9.2% of its annual economic output at the end of last year, to 6% this year.

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