Eurozone: Uncertain future with unemployment ravaging the South

Economic and Monetary Affairs Committee of the European Parliament ECON – discussion with Klaus Regling, Managing Director of the European Stability Mechanism (ESM), photographed here with ECON chair Sharon Bowles (ALDE UK). (EU Parliament Audiovisual Service, 24/09/2013).

Unemployment in Eurozone remained unchanged last August at 12% in relation to July, when it had slightly receded, compared with the 12.1% in June. This marginal reduction of unemployment in July was hailed as an indication that Eurozone is about to abandon its long term recession, an estimate also based on a marginal increase of euro area’s GDP by 0.3%, in the second quarter of this year. However all those optimistic assessments of Eurozone’s economy vanish in the thin air, if one takes a look at the absolute numbers behind percentages. Reality becomes dreadful if one starts reading the data of the south Eurozone countries under stress.

According to Eurostat the absolute number of unemployed persons in Eurozone, between the summer of 2012 and 2013 has risen by a round million. A look at the real numbers is quite discouraging. In August 2012 the unemployed people were 18,283 thousands. In May 2013 May the toll of workers without work reached 19,212 thousands, in June 2013 19,194, in July 2013 19,183 and in August 2013 19,178 thousand people. It becomes obvious that the slight variations in the numbers of unemployed persons between May and August this year are absolutely insignificant, compared to the one million increase between 2012 and 2013. Actually a positive or negative difference of one hundred thousand in 19 million is well within the statistical error.

Eurostat is not conducting every month unemployment censuses and the statistical error is a strong possibility. In any case the truth remains that around one million people lost their job during the last twelve months and the possibility to find a new one looks non-existent. Passing to country level the scenery becomes explosive. Differences are killing.

How can they stand it?

In August, among member states, the lowest unemployment rates were recorded in Austria (4.9%), Germany (5.2%) and Luxembourg (5.8%), and the highest in Greece (27.9% in June 2013) and Spain (26.2%). Compared with a year ago, always according to Eurostat, “the unemployment rate increased in sixteen Member States fell in eleven and remained stable in Poland. The highest increases were registered in Cyprus (12.3% to 16.9%) and Greece (24.6% to 27.9% between June 2012 and June 2013). The largest decreases were observed in Latvia (15.6% to 11.4% between the second quarters of 2012 and 2013) and Estonia (10.1% to 7.9% between July 2012 and July 2013)”.

South Eurozone countries not only remain the champions of unemployment but the number of people without a job increases so fast, that it has reached unbelievable dimensions. It becomes increasingly a miracle how the Greek and Spanish societies remain in one piece and they still are running a political system more or less normal. The crack-down of the Golden Dawn fascist fabrication – in reality a criminal gang pretending to be Greek Parliamentary party – is the proof that those countries of the south are at the verge of their endurance.

A series of crisis

The same is true for Italy, where Berlusconi’s People of Freedom party (PdL), which governed Italy for many years, is just being dissolved. Around 40 senators of PdL have created a new political formation continuing their backing to the left-right government coalition, under Prime Minister Enrico Letta. Berlusconi wanted to deprive Letta from PdL’s Parliamentary backing and send Italy to a new electoral adventure. Still the Italian political system found the courage to neutralise Berlusconi and safeguard the stability of the country. What about the next crisis though?

It’s not only Italy and Greece having problems. Portugal also faces a series of crisis relating to austerity policies, the fast rising unemployment and the impoverishment of large parts of population. Spain can be included in the same category, but its government is much more stable and has absolute majority in Parliament.

The Problem is though that there is no light at the end of tunnel and the entire south Eurozone area is locked in a vicious cycle, with Germany refusing to change its stance. There is no strong political will in Europe for a closer union and Berlin refuses to lead and pay the way towards this direction. Even the European Parliament is lukewarm about that.

Yesterday the Economic and Monetary Affairs Committee of the EU Parliament issued its annual resolution and the main theme in it is understandably the European Semester economic policy coordination structure. However what the legislators had to say about that is rather disappointing. According to law makers this policy “needs many fixes, not least to take proper account of growth, employment, investment and social concerns”.

The European Semester is the process whereby Eurozone’s member states have conceded the coordination of their budgetary and economic policies to Brussels and Berlin. The Parliament though all it had to propose to the Commission and the wealthy EU member states is just a tautology like “take proper account of growth, employment, investment and social concerns”. In view of all that south Eurozone’s prospects are rather unpredictable. It’s questionable how much longer the political systems of Greece, Italy, Portugal and Spain can tolerate a fast growing impoverishment engulfing all the time and new parts of society. There is a cracking point in everything.