Euro-area unemployment climbs to record 11.6 per cent


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The Independent Online

The jobless rate in the euro area climbed to a record in September as the fiscal crisis and tougher austerity measures threatened to deepen the economy's slump.

Unemployment in the economy of the 17 nations using the euro rose to 11.6 percent from 11.5 percent in August, the European Union's statistics office in Luxembourg said today. That's the highest since the data series started in 1995. The euro-area inflation rate fell to 2.5 percent in October from 2.6 percent in the previous month, according to a separate report.

The sovereign-debt crisis has pushed at least five euro nations into recessions and eroded investor and business confidence, forcing companies to cut costs to help weather the turmoil. The European Central Bank, which has cut borrowing costs to a record low, last month predicted a deeper slump this year than previously estimated, with ECB President Mario Draghi saying risks to the outlook area "on the downside."

"It already looks highly likely that the euro zone is headed for further economic contraction in the fourth quarter," Howard Archer, chief European economist at IHS Global Insight, said before Wednesday's report. "With the underlying inflation situation in the euro zone still looking far from alarming, we believe that the ECB will ultimately take interest rates down from 0.75 percent to 0.5 percent."

The September unemployment rate was in line with the median estimate of 24 economists in a Bloomberg News survey. The October inflation rate also matched the median forecast, according to a separate survey.

Wednesday's jobless report showed that 18.5 million people were unemployed in the euro area in September, up 146,000 from the previous month. At 25.8 percent, Spain had the highest jobless rate in the currency bloc. Portugal's unemployment rate was at 15.7 percent, while Ireland reported a jobless rate of 15.1 percent. France's jobless rate was at 10.8 percent. Austria had the lowest unemployment at 4.4 percent.

Job cuts at some of the largest companies in Europe may deepen the economic slump by eroding consumer spending across the euro area. Deutsche Lufthansa, Europe's second-largest airline, is seeking to save 1.5 billion euros ($1.9 billion) through 2014 partly by eliminating 4,500 positions.

Fiat, the Italian carmaker that controls Chrysler, forecast a prolonged downturn in the European market Tuesday after reporting a wider loss there. The Turin, Italy- based company also cut revenue and profit goals for 2014.

"Events of the past 12 months have reinforced our negative view of the development of the European markets," Fiat Chief Executive Officer Sergio Marchionne said. "We see continuing weak trading conditions for the remainder of 2012, extending well into 2013 and at least part of 2014."

Euro-area core inflation, which excludes volatile costs such as energy, held at 1.5 percent in September. The statistics office will release the figure for October next month.

The ECB and the International Monetary Fund have both cut projections for euro-area growth next year and forecast a deeper slump in 2012 partly because of the fiscal turmoil. The central bank on Sept. 6 also lowered its inflation estimates for this year and next.

The Frankfurt-based ECB will hold its next rate assessment on Nov. 8.