Just a few weeks after the UK announced it had entered recession again, the news has emerged that Spain – the fourth largest economy in the eurozone – has also sank back into the mire.

Statistics have shown that Spain’s economy shrank 0.4% in the first quarter, placing the country back in recession. For a country to be in a technical recession, it must register economic contraction, two quarters in a row. Spain closed 2011 with a 0.3% decline and has now sank into the dreaded double dip – it is the second recession in three years.

Spain, of course, is mired in problems. It has massive unemployment – 23% – and following the bursting of the property bubble, some areas have youth unemployment (including graduates) of over 60%, leading to massive brain drain overseas. Various reports have projected that the number of jobless is set to increase.

Meanwhile, credit agency Standard & Poor’s reduced Spain’s long-term sovereign credit rating to ‘BBB+’ from ‘A’. The agency also lowered Spain’s short-term rating and assigned a negative outlook, which suggests the possibility of another downgrade in the near future.

Spain’s credit rating is still investment grade, three notches above junk status. Nonetheless, the lower rating could increase the nation’s borrowing costs because investors will likely demand higher interest rates to compensate for the greater risk implied by the downgrade. Spain did a lot better than expected in its last bond auction, but the spread (the viability cost) almost touched the unsustainable levels which forced others, such as Portugal and Ireland, to seek bailouts.

However, there is some form of levity in the projection of Greece’s credit rating to be raised. Its bonds have been trading at ‘junk’ status for over a year now.

There is light at the end of the tunnel, though. The European crisis was precipitated by the crash in the US, following the collapse of the Lehman Brothers. The fallout spread from the US to Europe and beyond. But, recent statistics have shown that while the US economy grew more slowly in the first three months of this year, that growth is set to continue slowly but steadily. The US economy grew at an annual rate of 2.2% in the January-March quarter, compared with a 3% gain in the final quarter of 2011. In 2011, the economy expanded just 1.7%. Longer-term growth is expected to rebound to around 3% for all of 2012 as stronger job growth spurs more consumer spending.

Malta continues to perform reasonably well. Sovereign debt continues to rise because Malta is still registering a deficit – within benchmarks for sustainable development – but employment continues to increase and the economy has continued to grow. It was predicted to grow at a sharper rate, but the IMF recently toned down figures. The cat has been put amongst the pigeons now, with French presidential candidate Francois Hollande advocating more public spending to get Europe out of austerity-induced recession. This was first advocated by previous British Prime Minister Gordon Brown, with catastrophic consequences. However, although Hollande acknowledges that Mr Brown’s ‘spend your way out of recession’ was flawed, he believes that carefully managed public spending can stimulate economic growth – especially if targeted correctly.

Perhaps he is right, however, we shall have to wait and see.