UNEMPLOYMENT across the 17 European Union countries that use the euro is on course to hit 20 million this year, according to figures showing the jobless rate rose to another record high .
Eurostat, the EU’s statistics office, announced yesterday that the unemployment rate rose to 12.2 per cent in April from the previous record of 12.1 per cent the month before.
A net 95,000 people joined the ranks of the unemployed, taking the total to 19.38 million. At this pace, unemployment in the currency bloc – which has a population of about 330 million people – could breach the 20 million mark this year.
The figures, once again, mask big disparities among the euro countries. While more than one in four people is unemployed in Greece and Spain, Germany’s rate is stable at a low 5.4 per cent.
The differences are particularly stark when looking at the rates of youth unemployment. While Germany’s youth unemployment stands at 7.5 per cent, well over half of people aged 16 to 25 in Greece and Spain are jobless. Italy’s rate has passed 40 per cent.
“Youth joblessness at these levels risks permanently entrenched unemployment, lowering the rate of sustainable growth in the future,” said Tom Rogers, senior economic adviser at Ernst & Young.
The differences reflect the varying performance of the euro economies – Greece, for example, is in its sixth year of a savage recession. Germany’s economy has until recently been growing at a healthy pace.
As a whole, the eurozone is in its longest recession since the euro was launched in 1999.
The six quarters of economic decline is longer even than the recession that followed the financial crisis of 2008, though it is not as deep.
One of the reasons behind Europe’s economic decline is governments’ focus on cutting debt aggressively by raising taxes and slashing spending programmes.
With many governments still pulling back on spending and business and consumer confidence still low, economists do not expect any dramatic recovery to emerge over the coming months.
The sharpest change in unemployment rates among the 17 euro countries was in Cyprus, which saw its jobless rate rise to 15.6 per cent from 14.5 per cent.
The small Mediterranean island nation became the fifth euro country to seek financial assistance in March.
The difference with the other bailouts was that the country was asked to raise a big chunk of its rescue money from bank depositors – a shock decision that led to a near two-week shutdown of the banks and battered economic confidence.
The European Central Bank (ECB) has sought to make life easier for Europe’s hard-pressed businesses and consumers by cutting its main interest rate to the record low 0.5 per cent earlier this month.
Another cut is possible, but most economists say it is unlikely, even though the inflation rate is still under the ECB’s target of just below 2 percent.
Eurostat said yesterday that inflation in the eurozone rose to 1.4 per cent in the year to May from the 38-month low of 1.2 per cent recorded in April. It blamed rising food, alcohol and tobacco prices for the increase.
Analysts said the ECB is more likely to take measures to shore up lending to small and medium-sized businesses, one of the main job creators in Europe. Such companies are currently not taking out many loans for fear the economy might worsen and because banks are charging high rates.
“So far, the ECB’s actions have not translated into lower lending rates for businesses and households, failing to boost activity,” said Anna Zabrodzka, economist at Moody’s Analytics.