Euro Zone Crisis: Unemployment At Record High
Unemployment in the 17-nation euro zone rose to a record high in May to 11.1 percent up from 11.0 percent in April, the highest since the data series started in 1995 and the highest since the euro was created in 1999. Joblessness has risen in the euro zone for the past fourteen months.
In May, 17.561 million people were unemployed, an increase of 88,000 from the previous month, says EU statistics body Eurostat. Spain’s unemployment rate, which is the highest in the EU, rose 24.6 percent in May, up from 24.3 percent.
A number of European companies including Deutsche Lufthansa AG, PSA Peugeot Citroen and Air France-KLM Group are seeking to eliminate jobs in order to lower costs as the fears over the ongoing fiscal crisis are more and more entrenched.
In the BBC, Chris Williamson, chief economist at data provider Markit: “Companies are clearly preparing for worse to come, cutting back on both staff numbers and stocks of raw materials at the fastest rates for two-and-a-half years.” A separate report, the manufacturing Purchasing Managers’ Index (PMI), showed manufacturing declining in June, for the eleventh straight month.
Mark Miller, an economist at Capital Economics Ltd. in London, in Bloomberg, described the “overall picture” as “worrying, as problems in the real economy are being compounded by problems in financial markets…. It’s very difficult to see an immediate end to this.”
Euro Zone in a Recession?
Holger Schmieding, chief economist at Berenberg Bank in London, said simply in the New York Times that “the data show the euro zone is in a recession.” Schmieding also said that the European Central Bank (ECB) must “step up and do its part” at a policy council on Thursday.
But it is also up to European leaders to act to resolve the euro zone debt crisis, which has dragged on since December of 2009. Mario Draghi, the ECB president, had said on May 31 that the bank is reaching the limits of its powers to address the crisis.
Last Friday, after a night of negotiations at the euro zone summit, politicians announced that bailout funds could be used to recapitalize struggling banks, rather than the funds going first to governments and driving up their debt. European leaders also initiated steps to create a unified banking regulator for the euro zone to “break the link between worries about banks and sovereign finances.”
The need for European politicians to act only grows as what the New York Times calls a “vicious cycle in which reduced government outlays contribute to declining growth, government revenue falls further, generating new pressure to cut spending” is already imminent.
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