Inflation in the euro zone has fallen below 2 per cent, while unemployment in the bloc hit a fresh high, a combination that will add pressure on the European Central Bank to cut its rock-bottom interest rates further.
Eurostat, the EU’s statistical office, said yesterday that inflation fell to 1.8 per cent in February from 2 per cent in January, closer to the ECB’s target of keeping the consumer prices index “below, but close to” 2 per cent. However, the encouraging news of a drop in consumer prices was offset by rising unemployment, as the rate of joblessness hit a fresh high in January at 11.9 per cent after it had stabilised at 11.8 per cent towards the end of 2012.
An extra 1.9 million people found themselves out of work in the first month of 2013 across the 17-country bloc, raising the number of unemployed to 19 million.
The latest figures highlight the human cost of the euro zone’s sovereign debt crisis and the austerity measures that followed it.
“Such unacceptably high levels of unemployment are a tragedy for Europe and they signal how serious crisis some euro zone countries are in,” said László Andor, European commissioner for employment and social affairs.
Sustainable growth
“The EU and its member states have to mobilise all available instruments to create jobs and to return to sustainable economic growth,” he added.
Mario Draghi, ECB president, will be under mounting pressure at next week’s monetary policy meeting to cut interest rates further in an attempt to reignite economic growth throughout the euro zone.
“The ECB currently seems reluctant to take interest rates lower than the current record low level of 0.75 per cent, but the bank could be forced into reconsidering its position if the euro zone fails to show clear signs of economic improvement over the coming weeks,” said Howard Archer, economist at IHS Global Insight.
Despite encouraging data this week that business sentiment in the euro zone is improving and economists’ forecasts that the bloc will return to economic growth in 2013, there are fears high unemployment is here to stay.
“We expect further increases through most of this year as companies are still adjusting staff numbers to the weak, or indeed, falling demand environment,” said Marie Diron at Ernst Young.
Tough austerity measures have been blamed by eminent academics as well as electorates for choking economic growth. – (FT)
