Spain's government said today it expects the country's unemployment rate - already the highest in the industrialised world - to surge to 24.3% in 2012.

The number of unemployed people surged past five million at the end of last year, resulting in a jobless rate of 22.8%, according to the National Institute of Statistics.

The Spanish government also said it expects the economy to shrink 1.7% in 2012, a slump that Madrid blames for its decision to relax this year's deficit-cutting target.

Hours earlier, Prime Minister Mariano Rajoy announced in Brussels that Spain will aim to keep the public deficit to within 5.8% of gross domestic product in 2012, far above the original 4.4% target.