Eurozone unemployment heading for 20 million
LONDON Unemployment across the 17 EU countries that use the euro hit another record high in April -- and appears to be on course to hit 20 million this year in what would be another gloomy landmark for the currency bloc.
Eurostat, the European Union's statistics office, said Friday that the unemployment rate rose to 12.2 percent in April from the previous record of 12.1 percent the month before. In 2008, before the worst of the financial crisis, it was around 7.5 percent.
A net 95,000 people joined the ranks of the unemployed, taking the total to 19.38 million. At that pace, unemployment in the currency bloc -- which has a population of about 330 million -- could breach the 20 million mark by the end of the year.
Eurozone economies have been suffering because their governments are trying to improve public finances through aggressive spending cuts and tax increases. The problem is they've done it at a time when much of the private sector has been unable to plug the gap in activity left by the retreating state, unlike in the U.S., which has opted for a more gradual approach to debt reduction.
The unemployment figures mask big disparities among the euro countries. While over one in four people are unemployed in Greece and Spain, Germany's rate is stable at a low 5.4 percent.
Eurozone unemployment by country
The differences are particularly stark when looking at the rates of youth unemployment. While Germany's youth unemployment stands at a relatively benign 7.5 percent, well over half of people aged 16 to 25 in Greece and Spain are jobless. Italy's rate has ticked up to over 40 percent.
"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's not as deep.
By contrast the U.S. economy has been growing steadily since the end of its recession in June 2009 and the jobs market has started to improve, with the unemployment rate falling to 7.5 percent in April.
Though the eurozone is the epicenter of Europe's debt crisis, other countries in the region are struggling to recover as well. Some, like Britain, are also pursuing deficit reduction measures at a time when demand in their main export market - the eurozone - is falling. As a result, the wider 27-nation EU, which includes the non-euro countries such as Britain and Poland, has seen unemployment ratchet higher in recent months. In April it was flat at 11 percent.
One of the reasons behind Europe's economic decline is governments' focus on cutting debt aggressively by raising taxes and slashing spending programs. 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 percent from 14.5 percent.
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 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 percent earlier this month.
Another cut is possible, but most economists say it's unlikely, even though the inflation rate is still under the ECB's target of just below 2 percent.
Eurostat said Friday that inflation in the eurozone rose to 1.4 percent in the year to May from the 38-month low of 1.2 percent recorded in April. It attributed the increase to rising food, alcohol and tobacco prices.
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.