Eurozone jobless numbers pass 15 million
The number of jobless people in the 16 countries that use the euro hit a 10-year high in July, shows official EU data.Brussels -- The fragile nature of Europe's economic recovery was laid bare Tuesday as unemployment burst through the 15 million barrier in the single currency eurozone.
As leaders of G20 economies prepare to cross swords on post-crisis strategy, the number of people out of work in the 16 countries that use the euro hit a 10-year high in July, official EU data showed.
The galling paradox for many who have lost jobs and even their homes is that broader signs of recovery on the back of stock market increases and property price stabilisation also gathered pace.
Consumption picked up in Germany, the bloc's biggest economy, with the German Federal Labour Agency saying a government scheme to subsidise shorter working hours was "stabilising the labour market" and lay behind an increase of only 9,000 jobless there.
Separately, an index of manufacturing activity in the eurozone, echoed in Italian figures, showed August levels edging ever closer towards expansion of the manufacturing base.
Nevertheless, economists warned that more setbacks could lie ahead with huge government stimulus programmes stemming the tide of redundancies.
Indeed, lingering credit crunch problems ahead of a general election this month also saw Germany's economy minister unveil a EUR-17.5-billion plan to lend directly to banks and bolster insurers.
"Politicians must arm themselves for the situation to worsen," the director general of German employers' group BDI, Werner Schappauf, told the newspaper Handelsblatt.
"The first tender green shoots of recovery could quickly dry up if companies find themselves without liquidity," he warned.
With deflation fears subsiding, analysts said the eurozone's benchmark interest rate would stay at its historic low of 1.0 percent when the European Central Bank meets on Thursday.
That decision is sandwiched between a gathering of European Union finance ministers in Brussels on Wednesday and a meeting of G20 finance ministers in London on Friday and Saturday aimed at preparing a summit of G20 leaders on 24-25 September in Pittsburgh.
"While keeping rates on hold this week, the ECB can shift gears from crisis management to safeguarding the momentum" seen in France and Germany, where each country enjoyed growth of 0.3 percent in the second quarter, ING senior economist Carsten Brzeski said.
While the political headlines ahead of Pittsburgh have focused on curbing bankers' bonuses, observers in Frankfurt will consider the latest forecasts for eurozone inflation offered by ECB president Jean-Claude Trichet.
The shadows of Europe's deepest post-war recession were cast across all 27 EU member states, the unemployment data showed.
In the eurozone, 15.09 million people were unemployed in July -- the seasonally-adjusted rate of 9.5 percent marking a watershed last seen in May 1999, the Eurostat agency said.
Compared with June, that meant a rise of 167,000 in the unemployed across the eurozone -- and 225,000 across the EU as a whole.
The figures for the full EU bloc were 9.0 percent, estimated at 21.794 million people out of work, the highest rate since May 2005.
The highest unemployment rate was recorded in Spain, at 18.5 percent after its economy was further battered by a massive slump in its once-powerful construction sector.
The lowest unemployment rate was the Netherlands' 3.4 percent.
Economist Howard Archer of IHS Global Insight warned that "eurozone unemployment still seems likely to rise markedly higher, thereby posing a serious threat to growth prospects over both the near- and medium-term.
"We suspect that economic activity will remain too weak to actually generate net jobs until at least the second half of 2010," Archer said, even though he expects other eurozone economies to return to growth in coming quarters.
Warning that the eurozone is "unlikely to see trend growth until 2011," he said it is "way too early to start talking about exit strategies."
AFP / Expatica