Provisional figures show that Spain's economy shrank 0.1% in 2010 as the government slashed spending to avert a debt crisis.
The economy fared better than the government's grim forecast for a 0.3% decline but even as the figures turned positive again late in the year, there was still not enough growth to make any impression on the country's massive jobless queues. Spain finished 2010 with the highest unemployment rate in the industrialised world at 20.3%.
In the fourth quarter of 2010 alone, GDP edged up 0.2%, the National Statistics Institute (INE) said.
The Spanish economy slumped into recession during the second half of 2008 as the global financial meltdown compounded the collapse of the once-booming property market.
Prime Minister Jose Luis Rodriguez Zapatero's Socialist government anticipates only a moderate improvement this year, with 1.3% growth and a jobless rate still at 19.3%.
Spain's major challenge has been to avert the debt quagmire that forced Greece and Ireland to accept EU-IMF economic and financial rescues last year.
As the EU's fifth-biggest economy, a rescue for Spain would dwarf previous debt crises in the bloc and force a re-think of the entire euro zone rescue mechanism.
The government has cut spending, announced sell-offs and reformed the labour market and pension system in an all-out battle to regain the confidence of investors on whom it depends to finance its debt.
Spain's public deficit soared to the equivalent of 11.1% of GDP in 2009, the third-highest in the euro zone after Greece and Ireland.
