Eurozone unemployment hits record high

Overall jobless rate hits 11.7 per cent in October, as European Central Bank predicts recovery to only start late 2013.
Last Modified: 30 Nov 2012 19:00
Protesters in Spain have attended demonstrations in Madrid against sweeping austerity measures [AFP]

Unemployment in the eurozone hit a record high in October, with more than 170,000 extra jobs lost and youth joblessness at almost 24 per cent, as the economy slumped into recession.

Overall, the eurozone had a jobless rate of 11.7 per cent in October, up from 11.6 per cent in September, with the numbers out of work rising to 18.7 million from 18.49 million, the Eurostat data agency said.

Year-on-year figures from the agency showed a particularly bleak picture for under 25 year olds, with almost one in four out of work both in the 17-nation eurozone, and 27-nation European Union - against one in five a year earlier.

Compared with October 2011, an extra 279,000 young people were out of work in the EU, and 350,000 in the eurozone in October this year.

The youth unemployment rate rose to 23.9 per cent in the eurozone and to 23.4 percent in the EU compared with 21.2 per cent and 21.9 per cent respectively a year earlier, Eurostat said.

In Greece, 57 per cent of under 25 year olds were jobless in August, the latest available figures, and in Spain 55.9 per cent in October.

Spain hit hard

The highest unemployment rate was recorded again in Spain, where 26.2 per cent of adults are out of work.

Austria again posted the lowest rate of 4.3 per cent and benchmark Germany and the Netherlands were at 5.4 and 5.5 per cent respectively.

Across the 27-state EU single market of half a billion consumers, 25.92 million men and women were out of work, illustrating the human impact of a public debt and banking crisis that has reverberated across the world.

Struggling companies and indebted households have also lost the confidence to spend and invest, evident in the annual consumer price inflation reading for November, which dropped to 2.2 per cent in November from 2.5 per cent in October.

Consumer price inflation was at its lowest level since December 2010. One of the smallest rises in energy price inflation in a year helped to bring inflation to near the European Central Bank's (ECB) target of near, but just under two per cent, opening the door to more rate cuts by the bank.

The ECB last cut its main refinancing rate in July, to a record low of 0.75 per cent, and economists in a Reuters news agency poll this week were more divided than ever on whether there will be another rate cut early next year.

"The outlook is still bleak," said Thomas Costerg, an economist at Standard Chartered in London, who sees an ECB rate cut in the first three months of next year.

"We think that ECB President Mario Draghi will leave the door open for more stimulus in the coming months."

The cost of borrowing for banks and households in the eurozone is already at a record low of 0.75 per cent and economists question whether further rate cuts will do much good, because of a lack of confidence among banks to lend.

The central bank may decide to postpone a rate cut until after its next meeting on December 6 as it tries to keep markets focused on the benefits of its recently-announced plan to buy the bonds of governments in distress and keep their borrowing costs down.

Road to recovery

The bond-buying programme has calmed nervy investors who predicted the break-up of the eurozone just a few months ago, and many are moving back into Italian and Spanish bond markets.

But the eurozone's economic reality is one of a slowing German economy, stagnation in France, recession for Italy and Spain and an outright depression in Greece, with no signs of a quick recovery.

Many economists blame the spending cuts implemented by almost all governments in the past three years to try to bring down their deficits that ballooned over the past decade.

Portugal, for instance, shed more than one in 20 public sector jobs in the first nine months of 2012.

But in a shift in tone, the International Monetary Fund and the European Commission now say that they may have been too aggressive in pushing for government cutbacks.

The commission is now advocating "growth-friendly fiscal consolidation".

Draghi, speaking on French radio on Friday, tried to sound cautiously upbeat and has avoided the word "recession" in his public comments in recent weeks.

"The recovery for most of the eurozone will certainly begin in the second half of 2013," he told Europe 1 radio. 


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