Eurozone Crisis Worsens as Unemployment Rises in the Region

Sources:
Eurostat: Euro Area Unemployment Rate
FT: Eurozone Unemployment Hits Euro-era High
Spiegel: The High Price of Abandoning the Euro
WSJ: Europe’s Crisis Gets Real as Unemployment Soars

The European debt crisis continues to worsen as borrowing costs increase, governments’ credit ratings are downgraded, and investor confidence continues to diminish. To make matters worse, the European Union’s statistical office, Eurostat, released its latest report last Wednesday on the unemployment rate in the region. The data highlights the rapidly depreciating economic outlook for the European Union (EU) and Eurozone, which many economists already say may be in a recession.

According to the report, the seasonally-adjusted unemployment rate (a rate that is adjusted to eliminate influences of predictable seasonal employment patterns) in the Eurozone was 10.3% in October 2011, compared with 10.2% just the previous month. This constitutes an increase of 126,000 unemployed workers, bringing the total to 16.3 million—the highest number since the statistical office started compiling such data in 1995. Compared with October 2010, unemployment rose by 367,000 in the region.

Among the member states, Greece and Spain saw the most significant increases in unemployment: Spain had a rate increase in one year from 20.5% to 22.8% and Greece from 12.9% to 18.3%. The lowest unemployment rates were recorded in Austria (4.1%), Luxembourg (4.7%), and the Netherlands (4.8%). Moreover, the economic crisis has especially affected the ability of young adults (under 25 years old) to find jobs. As the report highlights, as of October 2011, there were 3,338,000 youths unemployed in the Eurozone—an increase of 141,000 from the previous year. The youth unemployment rate is now 21.4% for the Eurozone. However, in countries such as Spain and Greece youth unemployment is even higher at 48.9% in Spain and 45.1% in Greece.

The rise in unemployment in the Eurozone is of particular concern for EU leaders who are trying to keep the region afloat. In addition to the suffering of the individuals who have lost their jobs and the growing discontent of the unemployed, the rise in unemployment puts an additional burden on governments trying to end the debt crisis. More unemployment means higher social security payments and lower tax revenues. These already cash-strapped governments will likely have to borrow more to support those out of work, which would only worsen the debt crisis. Also, the economic growth of the country suffers as individuals (now with lower or no income) cut back on spending, which lowers profits for businesses, which then have to lay off more workers. Thus, the increase in unemployment comes as a sign that perhaps the worst is yet to come in the European debt crisis if governments do not start taking more drastic actions.