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No light at the end of the tunnel when it comes to joblessness

RECORD unemployment and struggling social welfare systems in southern Europe risk dividing the continent, the EU has warned as new figures showed joblessness across the eurozone hit a new high.

Official data showed unemployment in the 17 countries that use the currency rose to 11.8 per cent in November, the highest since the euro was founded in 1999. The rate was up from 11.7 per cent in October and 10.6 per cent a year earlier.

In the wider 27-nation EU unemployment broke the 26 million mark for the first time with the jobless rate increasing in 18 countries, falling in seven and remaining stable in Denmark and Hungary. 

Last year "has been another very bad year for Europe in terms of unemployment and the deteriorating social situation," said Laszlo Andor, the EU's Employment Commissioner.

"Moreover, it is unlikely that Europe will see much socio-economic improvement in 2013," he said.

A closer look at the figures shows the rise in unemployment was greatest among those countries - mostly in southern Europe - where market concerns over excessive public debt have pushed governments to make the toughest savings.

States have raised taxes and slashed spending - including by cutting wages and pensions, measures that hit the labour force in the pocket and reduce demand in the economy.

The single biggest increase in unemployment over the past year took place in Greece, where joblessness soared to 26 per cent in September, up 7.1 per cent over September 2011's 18.9 per cent. But the highest overall rate in the EU was in Spain, where 26.6 per cent of the workforce was jobless in November, up 3.6 per cent from last year.

In Cyprus unemployment increased substantially from 9.5 per cent in November 2011 to 14 per cent in November 2012 according to the Eurostat figures.

The unemployment rate of 14 per cent in November of last year was a 0.2 per cent increase over October of the same year.

By contrast, Austria posted the lowest unemployment rate in the EU, at 4.5 per cent. The rate in Luxembourg was 5.1 per cent, and the rate in Germany was 5.4 per cent. Britain had 7.8 per cent.

Between November 2011 and November 2012, the unemployment rate for men increased from 10.4 per cent to 11.7 per cent in the eurozone and from 9.9 per cent to 10.8 per cent in the EU27. 

The female unemployment rate rose from 10.9 per cent to 11.8 per cent in the eurozone and from 10.1 per cent to 10.7 per cent in the EU27.

In November 2012, almost 5.8 million young people under 25 were unemployed in the EU27, of whom almost 3.8 million were in the eurozone. 

Compared with November 2011, youth unemployment rose by 329,000 in the EU27 and by 420,000 in the eurozone. In November 2012, the youth unemployment rate was 23.7 per cent in the EU27 and 24.4 per cent in the euro area, compared with 22.2 per cent and 21.6 per cent respectively in November 2011.

In November 2012 the lowest rates for youth were observed in Germany (8.1 per cent), Austria (9.0 per cent) and the Netherlands (9.7 per cent), and the highest in Greece (57.6 per cent in September 2012) and Spain (56.5 per cent).

And increasingly, southern nations are chipping away at their social safety system to make do.

"Most national welfare systems have lost much of their ability to protect household incomes against the effects of the crisis," said Andor.

The figures illustrate the daunting tasks confronting the European Union. While the threat of a collapse of the eurozone due to too much government debt may have receded, many national economies wallow in recession and joblessness continues to rise, creating poverty and fuelling social discontent.

"A new divide is emerging between countries that seem trapped in a downward spiral of falling output, fast rising unemployment and eroding disposable incomes and those that have so far shown good or at least some resilience," Andor said.

Beyond savings cuts, governments have also made reforms – particularly of labour practices and education - to promote employment. But they take time, both to enact and to feed through an economy.

As unemployment across the eurozone continues to rise, many analysts are concerned whether the political will to continue to cut budgets can be sustained.

"We expect the unemployment rate at the eurozone level to continue to rise from 11.8 per cent in the latest figures to 12.5 per cent by early 2014, as eurozone businesses and households remain wary, and governments continue to cut back," said Tom Rogers of Ernst & Young Eurozone Forecast.

One bright spot in yesterday’s EU statistical releases were new figures showing economic sentiment in the eurozone had improved in December. The so-called economic sentiment indicator rose by 1.3 points to 87 as confidence improved among consumers and almost all business sectors.

Analysts said it was likely a result of improvements in financial markets, but warned that with unemployment still high, a recovery in the economy was months away.

(PA, with additional reporting by Peter Stevenson)