Much of Spain was brought to a halt by a general strike on Thursday, but the bond market vigilantes are also striking, by avoiding the country’s debt.

Yields on Spanish 10-year bonds rose sharply in March, overtaking the rate on sovereign debt in Italy — another troubled peripheral euro zone economy — for the first time since August.

Rates for Italy and Portugal — which have at different times taken the leading role in the euro zone debt drama — have fallen in the wake of the European Central Bank’s decision to flood the euro zone banking system with hundreds of billions of euros of cash on the final day of February; a move repeating its successful December initiative. Although this injection of liquidity has moderated fears that a credit crunch could hit other risky government bond markets, concerns about Spain have risen, as the bond vigilantes have protested against the country’s fiscal woes by selling their Spanish debt or even shorting the market. Why is this?

Spain’s economy is in a dismal state, even by the grim standards of much of the rest of the euro zone. A spectacular bust in the labor-intensive real estate sector has pushed unemployment up to 23.3 percent — the highest among the 34 developed nations in the Organization for Economic Cooperation and Development (OECD), and almost three times the OECD average of 8.2 percent. The ultra-high level of joblessness has depressed tax revenue — leaving Spain’s fiscal deficit at a massive 8.5 percent of gross domestic product (GDP) last year.

Unemployment is likely to rise even further, as Spain tries to calm its bond market by closing this fiscal gap. This means that instead of boosting government spending to bring unemployment down, it is reducing public sector budgets aggressively, which is likely to push joblessness up. “We expect the unemployment rate to increase to 25 percent as the impact of fiscal austerity measures is increasingly felt,” says Credit Suisse in a research note. Bank of America Merrill Lynch worries about the long-term consequences, saying, “The persistence of elevated joblessness risks becoming entrenched, as long-time jobseekers lose skills and face greater hurdles to return to employment.” Permanently high unemployment could place an unsustainably heavy burden on the public finances.