LONDON – Unemployment in the 17-country euro currency bloc hit another record in May as the continent teetered on the edge of recession because of its crippling financial crisis, official figures showed Monday.
Eurostat, the EU’s statistics office, said unemployment rose to 11.1 per cent in May from 11 per cent the previous month. May’s rate was the highest since the euro was launched in 1999 and adds further urgency to the eurozone countries’ plan to create economic growth and cut excessive government debt.
At a summit last Friday, eurozone leaders agreed a set of short- and long-term measures to shore up the euro and unveiled a limited economic growth package. Markets have responded positively with a stock market rally which, if sustained, should help buoy economic confidence in the eurozone — a key step to easing the crisis.
May’s unemployment rate compares badly with an unemployment rate of 8.2 per cent in the United States and only 4.4 per cent in Japan, and is expected to rise further in the coming months as the eurozone economy teeters on the edge of recession.
“With the eurozone likely having suffered appreciable GDP contraction in the second quarter and in grave danger of contracting again in the third, and with eurozone business confidence generally low and fragile, the likelihood is that the eurozone unemployment rate will move significantly higher over the coming months,” said Howard Archer, chief European economist at IHS Global Insight.
In total, 17.6 million people were out of work in the eurozone in May, 1.8 million higher than a year earlier.
Unemployment has been edging higher for over a year as concerns over the debt crisis and the future of the euro currency have weighed on economic activity. Businesses have been cutting jobs or delaying hiring as confidence in the economy waned, while many governments have pursued austerity programs, including big job reductions in the public sector.
There are huge disparities across the eurozone, however.
The labour markets of those countries at the front line of the debt crisis, such as Greece and Spain, are suffering most due to their governments’ stringent austerity measures and deep recessions. The highest unemployment rate across the eurozone was recorded in Spain, where 24.6 per cent of people were out of work in May. Even more dramatically, 52.1 per cent of the country’s youth were unemployed.
Other countries in the eurozone, particularly those in the north, are faring better. Germany’s unemployment rate stood at only 5.6 per cent. However, a raft of economic indicators in recent weeks have shown that Europe’s biggest economy is not immune to the problems in the rest of the region. Germany’s exports to other countries in the eurozone are under pressure and business confidence is waning.
Across the wider 27-country European Union, which includes non-euro countries such as Britain and Poland, unemployment edged up to 10.3 per cent in May from 10.2 per cent the month before.