Eurozone jobless record

Unemployment has reached a new high in the eurozone and inflation remains well below the European Central Bank’s target, stepping up pressure on EU leaders and the ECB for action to revive the bloc’s sickly economy.

Even if governments take on unions and vested interests to enact reforms, they will take time to produce benefits

Joblessness in the 17-nation currency area rose to 12.2 per cent in April, Eurostat said yesterday – a new record since 1995.

With the eurozone in its longest recession since its creation in 1999, consumer price inflation was far below the ECB’s target of just below two per cent at 1.4 per cent in May, slightly above April’s 1.2 per cent rate.

That rise may quieten concerns about deflation, but the deepening unemployment crisis is a threat to the social fabric of the eurozone. Almost two-thirds of young Greeks are unable to find work, exemplifying Southern Europe’s ‘lost generation’.

Economists and policymakers including Germany’s Finance Minister, Wolfgang Schaeuble, have said the greatest menace to the unity of the eurozone is now social breakdown from the crisis, rather than market-driven factors.

In France, Europe’s second-largest eco-nomy, the number of jobless rose to a record in April, while in Italy, the unemployment rate hit its highest level in at least 36 years, with 40 per cent of young people out of work.

“I’ve sent CVs everywhere, I come to the unemployment agency every day for three or four hours to look for work as a truck driver and there’s never anything,” 42-year old Djamel Sami said in Paris.

Thousands of demonstrators from the anti-capitalist Blockupy movement cut off access to the ECB in Frankfurt yesterday to protest against policymakers’ handling of Europe’s debt crisis.

Some economists believe the ECB, which meets on June 6, will have to go beyond another interest rate cut and consider a US-style money-printing programme to breathe life into the economy.

“We do not expect a strong recovery in the eurozone,” said Nick Matthews, a senior economist at Nomura International in London. “It puts pressure on the ECB to deliver even more conventional and non-conventional measures.”

In the past, the eurozone has needed economic growth of around 1.5 per cent to create new jobs. With the Organisation for Economic Cooperation and Development forecasting this week that the eurozone economy would contract by 0.6 per cent this year, unemployment is set to worsen long before it turns around.

“We do not see a stabilisation in unemployment before the middle of next year,” said Frederik Ducrozet, an economist at Crédit Agricole in Paris. “The picture in France is still deteriorating.”

ECB president Mario Draghi, whose pledge to buy the bonds of governments in trouble helped protect the eurozone from break-up last year, has so far left the onus on governments to reform.

A majority of economists polled by Reuters do not expect the ECB to cut its deposit or main refinancing rates soon, although the OECD this week called for the bank to consider printing money for asset purchases to revive growth.

ECB policymaker Ignazio Visco said yesterday it stood ready to take further action, but that monetary policy alone could not solve the eurozone’s economic problems.

The EC told governments they must focus on reforms to outdated labour and pension systems to regain Europe’s business dynam-ism, shifting the policy focus away from debilitating budget cuts towards growth.

EU leaders are expected to put the pro-blem of joblessness at the forefront of a summit in Brussels at the end of June.

European Council President Herman Van Rompuy, who chairs the meetings, said last week youth unemployment was one of the most pressing issues for the 27-nation European Union as a whole.

Ministers from France, Italy and Germany this week called for urgent action to tackle youth unemployment, with Schaeuble describing it as a “battle for Europe’s unity” and warning of revolution if Europe’s welfare model is abandoned.

In April, 5.6 million people under 25 were unemployed in the European Union, with 3.6 million of those in the eurozone. Even if governments take on unions and vested interests to enact reforms, they will take time to produce benefits.

“For two to three years it looks like a dead-end road,” said an unemployed sales manager in Paris who gave his name as Dany. “I don’t see how things can improve as long as we are not united to face the pressure from Asia and Latin America.”