Spanish hourly labour costs dropped for the first time in two years in the fourth quarter of last year, official data showed on Monday, as the recession-battered economy struggles to claw back competitiveness.

The EU-harmonised cost-per-hour-worked fell 3.1 percent from October to December from a year earlier, the steepest drop since the series began in 2000 and only the third time wages have fallen since the economic crisis began in 2008.

Spain is deep in its second recession in two years, and the economy is expected to continue to contract through 2013, after a burst property bubble over four years ago gutted domestic demand, the key driver of a decade-long economic boom.

The rising weight of exports has been the country's only pillar of hope since the slump began, and the government hopes increasing competitiveness, as mass unemployment encourages lower wages, will pull the economy back to growth.

More than one in four workers in Spain cannot find a job and over half of under 26-year-olds are unemployed.

(Reporting By Paul Day)