Unemployment has hit a new high in the eurozone, increasing the pressure on EU leaders and the European Central Bank to do more to revive the region’s weak economy.
Top politicians, as well as economists, are warning that the greatest threat to the unity of the eurozone is now social breakdown from the crisis – particularly with so many young people out of work.
The EU’s statistics office said 12.2 percent of the workforce in the eurozone’s 17 countries was registered as unemployed in April – up from the previous record of 12.1 percent in March.
The figures mask big disparities among countries, with more than one in four people unemployed in austerity-ravaged Greece and Spain, while Germany’s rate is just 5.4 percent.
The biggest worry for policymakers is southern Europe’s ‘lost generation’.
Close to a quarter of under 25-year-olds cannot find work in the eurozone. But almost two-thirds of young Greeks were jobless in February, the latest total is Spain is 56.4 percent, 42.5 percent in Portugal, 40.5 percent in Italy.
With the Organisation for Economic Cooperation and Development having just forecast the eurozone economy would contract by 0.6 percent this year, unemployment is set to worsen long before it turns around.
Risk to the euro’s future
EU leaders are expected to put the problem of joblessness at the forefront of a summit in Brussels at the end of June.
European Council President Herman Van Rompuy, who chairs the meetings, said last week youth unemployment was one of the most pressing issues for the 27-nation European Union as a whole.
Ministers from France, Italy and Germany called this week for urgent action to tackle youth unemployment, with Germany’s finance minister, Wolfgang Schaeuble describing it as a “battle for Europe’s unity” and warning of revolution if Europe’s welfare model is abandoned.
German Chancellor Angela Merkel has also invited all EU labour ministers for a youth unemployment conference in Berlin on July 3.
“Merkel and Schaeuble know very well that the future of the euro is not just decided in Brussels or Berlin, but on the streets of Madrid, Athens and so on,” said Carsten Brzeski, an economist at ING in Brussels.
“High youth unemployment combined with hatred for Germany can turn into populism and nationalism quite quickly and, in the extreme case, lead to an end of the currency union.”