CFR Update: Eurozone Unemployment Rises

Daily News Brief January 8, 2013

Top of the Agenda: Eurozone Unemployment Rises

Unemployment in the twenty-seven nation eurozone hit a new high (FT) of 11.8 percent in November, highlighting the dire state of the bloc's economy in spite of hopes for a gradual recovery this year. Some twenty-six million people were out of work in November, or 10.7 percent of the workforce. The biggest rise (AP) in unemployment over the past year took place in Greece, where unemployment spiked to 26 percent in September, although the highest overall rate was in Spain, at 26.6 percent in November. The figures reflect a precariously fragile economy, despite an improvement in financial markets and forward-looking economic indicators that had suggested the acute phase of Europe's sovereign debt crisis could be drawing to a close.

Analysis

"The eurozone economy contracted in the second and third quarters of last year, and the rise in unemployment adds to other recent evidence suggesting it shrank again in the final three months of 2012. Nor is this likely to be the last rise in the unemployment rate, as governments cut jobs and businesses remain reluctant to hire in the face of sluggish demand amid continuing uncertainty about the eurozone's fiscal and banking crises," write Paul Hannon and Alex Brittain for the Wall Street Journal.

"The ECB has repeatedly been pressed into action by Europe's worsening debt crisis over the last three years, but has bought some calm with its latest, as-yet untested, promise to buy bonds issued by states that seek an official bailout. Expectations that rates will be left unchanged after Thursday's meeting are supported by the strong start to the year for risky eurozone bonds after a late deal to avert a fiscal crunch in the United States," writes William James for Reuters.