What has caused the recent 25% unemployment rate in Spain? The unemployment rate in Spain has recently been fluctuating around 25%.

What has caused this?
Here's an explanation from Paul Krugman. You can read more about this in Krugman's book End This Depression Now!. 



Since joining the Euro, Spain has experience large capital inflows—money flowing into Spain, mostly from Northern Europe. These inflows caused a boom in investment, coupled with an increase in prices of virtually everything (including labor) relative to other Eurozone countries.

One consequence of this is that the recession in Spain has been exacerbated by the fact that high costs of production (especially high labor costs) made the Spanish economy less competitive so that the country wasn't able to rely on exports to substitute for the reduced domestic demand.

In order to remedy this situation, Spain needs to become more competitive (i.e. for labor costs to fall relative to those in other countries). Normally, this would happen automatically: as a country exports less, demand for its currency from importers (and hence the currency's value) falls so that its products become cheaper for foreigners. However, the fact that Spain is in the Eurozone means that it can't devalue its currency—it doesn't have one of its own!

Instead, Spain must rely on 'internal devaluation', i.e. reducing the wages of its workers relative to those elsewhere in the Eurozone. This is problematic because workers are typically reluctant to accept a pay cut (so-called downward nominal rigidities). Thus, the way that the economy adjusts is to have a sufficiently large share of the workforce unemployed that people are prepared to accept jobs on significantly lower wage than they might have expected in the pre-recession years.

It should be noted that this line of reasoning is not without controversy. For one, a significant share of macroeconomists do not believe the nominal rigidities story.