But, but, wasn't the Green Economy going to make Spain rich with full employment. Just ask Obama

Greek and Spanish economies falter ahead of expected rise in interest rates

European central bank president Jean-Claude Trichet insists inflation must be quashed

Europe's north-south divide has worsened as figures show Spain and Greece faltering, with rising unemployment and plummeting retail sales. Meanwhile the European Central Bank (ECB) is preparing to raiseinterest rates on the back of a booming German economy.

Spain's unemployment rate jumped to a European record of 21.3% last month while Greece's retail sales dropped more than 10% year-on-year as both countries demonstrated the difficulties of spurring economic growth while implementing severe public spending cuts.

Almost five million workers are out of work in Spain, according to official statistics, despite efforts by the socialist-led government to kick-start the economy and generate jobs. Youth unemployment remains above 40%. The gloom in Madrid was reinforced by retail sales data for March, which showed the country's sharpest decline for more than two years.

Despite the problems facing Spain, Greece and other troubled eurozone nations, the ECB is expected to raise interest rates, possibly as early as next week, after inflation climbed to 2.8%. The inflation figure, published by Eurostat, the EU statistics agency, was up from 2.7% in March.

Central bank president Jean-Claude Trichet said this week that policymakers must quash inflation expectations to avert the risk of wage rises leading to even higher prices, adding: "We have risks of second-round effects."

Inflation has remained above the ECB's goal of just under 2% largely owing to higher oil and food prices. Although the bank expects prices to ease next year, it has been worried enough to start raising rates from record lows, increasing them by 0.25 percentage points this month to 1.25% in order to combat inflationary pressures. Economists predict several more such increases by the year's end.

Trichet is at odds with his counterparts in the US and Britain, who have consistently argued the recovery needs to be firmly entrenched before implementing rate rises. A meeting of the Bank of England's monetary policy committee next week is expected to keep rates on hold at 0.5%, despite inflation reaching 4% and three members of the nine-strong committee voting for a rise last time.

Trichet infamously refused to cut interest rates in line with the Federal Reserve ahead of the banking crisis before being forced to cut radically following Lehman Brothers' collapse in September 2008.

The EU's broad economic sentiment indicator fell significantly, by 2.3 points to 105.1, for the 27-member European Union, weighed down by a sharp drop in Britain's services and retail sectors. The index fell more moderately by 1.1 points to 106.2 for the eurozone, propped up by Germany, France and the Netherlands, the only countries where the index remains above its long-term average.