UNEMPLOYMENT has hit a new record high in the Eurozone as the devastated peripheral economies continue to drag the rest of the currency area into a deep and painful recession, official figures showed yesterday.
Almost 20m are now jobless, sapping the economies further as benefits bills soar and output plunges.
The dire numbers pile more pressure on the European Central Bank to act, with analysts predicting an interest rate cut tomorrow – but with rates already at just 0.75 per cent and the economy going nowhere fast, such a move is unlikely to have a big impact.
Unemployment hit 12.1 per cent in March, up from 11 per cent a year ago and equivalent to 19.2m jobseekers.
It comes after the latest growth figures showed the economy shrank 0.6 per cent in the final quarter of 2012, after a slow recession through the rest of the year. And falling job and confidence indicators suggest that will get worse this year – yesterday’s data from Spain showed a 0.5 per cent drop in the first quarter.
For the EU as a whole unemployment stands at 10.9 per cent, or 26.5m workers across the continent. Youth unemployment hit 3.6m, 24 per cent.
Greece’s 16 to 25 year olds are the worst affected with 59.1 per cent out of work at the start of the year, closely followed by Spain’s 55.9 per cent and Italy’s 38.4 per cent. Overall unemployment is also worst in Greece at 27.2 per cent and Spain at 26.7 per cent. Economists fear the recession will not be over soon, leaving unemployment stuck at high levels.
“Ever since the Eurozone allowed contagion to spread from tiny Greece to the region as a whole in mid-2011, unemployment has surged and surged,” said Holger Schmieding from Berenberg Bank. “While tensions in the Eurozone have subsided substantially ever since the European Central Bank (ECB) finally tackled contagion in July 2012, this turnaround has not yet translated into an economic upswing, let alone a labour market rebound.”
Only a handful of small Eurozone countries saw unemployment fall. Of those Austria has the lowest rate with joblessness falling from 4.8 per cent to 4.7 per cent. Falling inflation has given analysts cause to believe the ECB could step in with lower interest rates tomorrow, though it may only have a marginal effect given rates are already at rock bottom levels. Inflation dropped from 1.7 per cent in March to 1.2 per cent in April, according to initial estimates from data agency Eurostat.
“Very low and receding inflation gives the ECB ample scope to cut interest rates from 0.75 per cent to 0.5 per cent at its May policy meeting, while ongoing poor Eurozone economic news give the bank ample reason to act,” said economist Howard Archer from IHS Global Insight.
“The latest comments by a number of senior ECB officials indicate an interest rate cut is very much on the cards. If the ECB does hold fire on interest rates, it is very likely only delaying the inevitable.”