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ATHENS, Greece (AP) — Greece's unemployment rate rose to a new record of 26 percent in September, underscoring the economic plight in the country as it heads toward a sixth year of recession.

The Greek Statistical Authority said Thursday that 1.295 million people — more than one-fourth of the workforce in this nation of 10 million — were recorded as unemployed in September. Unemployment rose from 25.3 percent the previous month and 18.9 percent a year earlier.

Greek unemployment has surged to the highest since the 1960s as a result of harsh austerity measures imposed in return for vital international rescue loans. The conservative-led coalition government is finalizing a major tax reform bill, demanded by international rescue creditors as one of several conditions for continued payments. It has promised to try to stem the country's recession, despite being forced last month to introduce another round of deeply unpopular austerity measures that are part of Greece's bailout commitments.

These measures include raising €3 billion ($3.9 billion) in extra tax revenue. A draft of the new tax bill presented to the conservatives' two center-left coalition partners late Thursday calls for cuts in corporate tax rates from 40 to 33 percent, a move meant to provide relief to employers struggling to cope with the crisis while maintaining a sufficient flow of tax revenue.

The draft also lowers the top income tax rate from 45 to 40 percent, but it expands the number of people who would have to pay that rate by including all incomes over €40,000 ($52,000) a year. Finance ministry officials said the draft bill also provides for a rise in the tax-free threshold to €9,000 ($11,700) — from €5,000 ($6,500) — linking family benefits with income, and higher taxation on farmers.

The tax bill must be submitted to Parliament for approval by Tuesday, two days before Greece is due to receive a new €34 billion ($44.4 billion) rescue loan installment. Earlier this week, the Bank of Greece confirmed government forecasts that the economy would contract by more than 6 percent this year, and by a further 4-4.5 percent next year. By the end of 2013, the economy is expected to have shrunk by 25 percent in six years.

The effects are most visible in the unemployment rate, which stood at just under 10 percent just before Greece's financial crisis began in late 2009. Since then, jobs have been vanishing at a pace of almost 1,000 a day.

The largest labor union, the GSEE, has predicted the jobless rate will reach 29 percent next year. "According to our calculations, the recession next year will be between 5 and 5.5 percent ... The money being taken out of the economy due to higher (taxes) is driving the recession," Savvas Rombolis, head of labor research at the union, told private Skai radio.

"So more businesses will close, more people will lose their jobs, and fewer graduates will find work."