As Spaniards celebrated the twelfth day of Christmas today by opening presents brought by the three wise men, the new government received an unwanted gift in the form of shocking unemployment figures that show almost one in four are jobless.

Figures from Eurostat revealed Spain's unemployment rate had hit 22.9%, with the country accounting for at least one in five of Europe's jobless.

The figures came just days after officials admitted the social security system had slipped into the red for the first time since 1999 and new finance minister Luis de Guindos warned that the welfare state was under threat.

Few people expect the figures to improve in the short term as Spain enters the second part of a double-dip recession. The Workers' Commissions trades union has said the fight is now to avoid unemploment rising from five million people to 5.5 million, or one-third of all the unemployed in the euro zone.

But measures to rein in a runaway budget deficit of around 8% will almost certainly push unemployment still higher as the new conservative government of Mariano Rajoy attempts to tax and axe its way out of trouble.

Rajoy has already hiked income tax, with some top earners now paying 56% – making Spain a rival for Sweden and Denmark as Europe's biggest taxer of the rich.

Further measures to shrink the state are expected to be introduced in coming days, with a partial sell-off on the cards of both airports and the lottery system.

But the tax rises and spending cuts announced to date account for less than half of Rajoy's target of reducing the deficit by up to €40bn (£33bn), leaving it at 4.4%, this year in order to meet European Union-set targets and calm bond markets.

More cuts are inevitable, though Andrew Benito of Goldman Sachs has warned that harsh austerity will deepen the fall back into recession. He anticipates the Spanish economy shrinking by 1.5% this year, while others predict zero growth.

"The measures risk compounding the significant headwinds already present in Spain's growth outlook," Benito said.

Spain's record unemployment reflects both a labour market in which employers shy away from offering jobs on anything other than precarious short-term contracts and the fall-out from a burst housing bubble that left hundreds of thousands of unskilled workers on the dole.

It also hides an underground economy that is estimated at between 20% and 25% of GDP. The new government has said it will introduce limits on cash transactions as a way of battling tax fraud.