MADRID: The euro-area jobless rate rose to a record in April after the currency bloc’s recession deepened in the first quarter, increasing pressure on its leaders and the European Central Bank (ECB) to spur economic growth.
The euro-area unemployment rate rose to 12.2 per cent from 12.1 per cent in March, according to the European Union’s statistics office in Luxembourg. That’s in line with the median of 37 economists’ estimates in a Bloomberg News survey.
“We’re engaged in a race against time, and in too many countries, too many people without a job – in particular young people – remind us that the battle is not yet won, and further efforts are needed,” said EU president Herman Van Rompuy, adding that he would present proposals for spurring growth and jobs at a June summit of the bloc’s leaders in Brussels.
The economy contracted 0.2 per cent in the first three months of the year, and is forecast to stagnate in the second quarter before returning to growth. The ECB projects that the euro-area economy will shrink 0.5 per cent this year.
The 17-nation economy’s contraction has forced the ECB to try to mitigate the damage by cutting interest rates and exploring unconventional ways of channelling money to needy companies, especially in the south. The ECB this month cut its benchmark rate to a record low of 0.5 per cent.
The number of jobless people in the euro area rose to 19.38 million in April, up 95,000 from the previous month. Youth unemployment was at 24.4 per cent. The jobless rate in Germany, Europe’s largest economy, held at 5.4 per cent, while Spain had the highest April rate at 26.8 per cent.
“The euro-region economy simply doesn’t have the momentum to bring the unemployment rate down at the moment,” said Jonathan Loynes, chief European economist at Capital Economics in London. “More telling than the overall level of unemployment is the disparities between countries that show cyclically and structurally different economies aren’t living together comfortably with the same currency and interest rates.”
Spain’s Gamesa last week said it would dismiss its 394 workers at its turbine blade plants in Albacete. Renault’s chief operating officer Carlos Tavares said on May 14 that France’s second-largest carmaker expects the European car market to shrink 5 per cent this year.
Still, EU leaders meeting in Brussels on May 22 ruled out any stimulus involving cash. “It’s not a matter of money,” German Chancellor Angela Merkel said. “It’s a matter of looking at how to spend this money most productively.”
On the same day, Spanish Premier Mariano Rajoy ruled out cutting taxes as he said he would change laws in favour of companies to end a sixth year of slump in the bloc’s fourth- largest economy, where the jobless number is the highest since at least 1976.
ECB president Mario Draghi last week called on countries to overhaul their economies as he said conditions remain “challenging.” Still, the ECB’s pledge to buy unlimited amounts of government bonds in exchange for countries signing up to economic reforms has translated into improved funding conditions throughout the region, he said. BLOOMBERG
