Angela Merkel hosts jobless summit in shadow of Portugal crisis


Germany's Angela Merkel will discuss with EU leaders in Berlin today how to tackle chronic youth unemployment at a summit critics say is a pre-election public relations exercise.

And now Portugal's political crisis, which threatens to upset its economic recovery from the eurozone debt crisis, has cast a shadow over the one-day meeting. Portuguese Prime Minister Pedro Passos Coelho is among those scheduled to attend.

Passos Coelho said late on Tuesday he would stay in power despite the resignations of his finance minister - architect of a programme of spending cuts and tax hikes sought by foreign lenders - and then of the foreign minister.

With unemployment at a record 17.7 per cent and 42 per cent of young people out of work, Portugal is one of the countries worst hit by the euro crisis, but Passos Coelho says he will stick to deficit goals agreed with lenders despite the resignations.

Unemployment in the eurozone as a whole stands at a record high of over 12 per cent and there are fears of a "lost generation" in Portugal and other struggling countries such as Spain and Greece. Many blame Merkel.

"This economic crisis is turning into a political crisis which is threatening social stability in these countries and Germany cannot remain indifferent," said her main challenger in September's vote, the Social Democrats' (SPD) Peer Steinbrueck.

Merkel has spent most of the eurozone crisis insisting over-indebted states cut public spending. Now, just ahead of her re-election bid in September, she is trying to rebrand herself as saviour of Europe's jobless as well as its public finances.