BRUSSELS—Unemployment across the 17 countries that use the euro remained at its record high rate of 11.4 per cent in August renewing concerns that efforts to slash debts have sacrificed jobs. While European leaders have calmed financial markets in recent months with promises to cut spending and build a tighter union, they haven’t solved the eurozone’s deep-rooted economic problems and the rising tide of joblessness. In August, 34,000 more people lost their jobs in the eurozone, according to data released Monday by the European statistics agency, Eurostat. The unemployment rate—the highest since the euro was created in 1999—is the same as July’s, which was revised up from 11.3.
Europe’s problems are dragging down the global economy. The region is the US’s largest export customer and any fall-off in demand will hit American companies—as well as President Barack Obama’s election prospects. The US’s 8.1 per cent unemployment rate is already making re-election an uphill battle for the president. The eurozone is in danger of slipping into recession this year after its economic output dropped 0.2 per cent in the second quarter. Six countries in the eurozone—Greece, Spain, Italy, Cyprus, Malta and Portugal—are already in recession. Howard Archer, the chief economist for IHS Global Insight, said it will take some time before Europe’s labour market rebounds. “There looks to be a very real danger that the eurozone unemployment rate could reach 12 per cent in 2013,” he said.
He thinks that will be the high-water mark, hit somewhere around the end of next year. While austerity measures were introduced to ease the financial crisis by lowering public debt, they are also slowing down economies as government spending drops off. This is also pushing unemployment higher and threatening the continent with recession. Some experts urge leaders to instead loosen spending to encourage growth. But many European countries have very little room in their budgets for such a stimulus. Greece, for instance, is already relying on a European bailout to pay its bills—and its rescue creditors are pushing for more cuts, not less. Spain, meanwhile, has just unveiled a €40 billion programme of spending cuts and reforms designed to convince international lenders and investors that it can keep a control of its deficit.
Greece and Spain have the highest unemployment rates in the eurozone, around 25 per cent for both. Other countries are also pushing through reforms that are designed to make it easier for companies to hire and fire workers. However, there are doubts that governments have the willpower to continue with the tough measures in the face of widespread popular protests. Tens of thousands of people poured into the streets of Madrid, Lisbon and Paris this weekend to protest austerity. In Spain and Greece last week, demonstrations descended into violence as protesters clashed with riot police. “It’s clearly unacceptable that 25 million Europeans are now out of work,” said Jonathan Todd, an EU spokesman for employment, citing figures for the entire European Union. “The figures ... demonstrate the importance of putting into place effective reforms.” Not all countries are struggling with high unemployment. Austria’s jobless rate, for instance, is 4.5 per cent, although that’s worse than it was a year ago. Germany’s stands at 5.5 per cent—and has actually improved since last August. In general, European countries outside the eurozone are faring slightly better than those inside. Britain’s unemployment rate in June—the latest available—was 8 per cent. For all 27 countries in the EU, the unemployment rate for August held steady at 10.5 per cent after the July rate was also revised up slightly. (AP)