High unemployment to continue haunting the EU

Eurostat, the EU statistical service, revealed yesterday that the “euro area (EA18) seasonally-adjusted unemployment rate was 12% in January 2014, unchanged since October 2013”. The number of people without a job though increased in January 2014 to 19,175 from 19,158 thousand in December 2013. The rate of unemployment remains obstinately stuck to those very high levels since many months, always on the rise during the last few years. In January 2013 it was quoted at 12%. This is an uneasy reality. It could have been worse if a large number of unemployed in countries like Romania and Bulgaria hadn’t decided to move to another EU country in search of a job. Anything between one twentieth to one tenth of working age people in Romania and Bulgaria left their country during the past ten years searching a better life elsewhere in the EU. Despite the fact that everybody in Brussels insists that the “recovery in the European Union is gaining ground and spreads across countries”, the uneasy fact remains that this anemic growth doesn’t seem to positively affect the labour market by reducing the number of people without a job. Even if one accepts that theoretically an increase of the GDP is felt in the labour market only after many months, this doesn’t seem to be the case in the Eurozone. GDP grew by 0.3% during the second quarter of last year but unemployment kept rising or stagnating in many member states. Which recovery? However, it’s not only unemployment that keeps emitting negative signals. The widely advertised recovery is also questionable. Yesterday the European Sting writer George Pepper concluded that “Combining the two findings (slight improvements in the Economic Sentiment and the Business Climate indicators during February), it becomes evident that the internal state of the economy doesn’t help the industrial sector much. If it wasn’t for the small increases in the export order book, both the Business Climate Indicator and the Economic Sentiment would have fallen in February, following the deterioration in consumer confidence”. In detail now, Eurostat found that among the EU member states, ‘’the lowest unemployment rates were recorded in Austria (4.9%), Germany (5.0%) and Luxembourg (6.1%), and the highest in Greece (28.0% in November 2013) and Spain (25.8%). Compared with a year ago, the unemployment rate increased in thirteen member states, fell in thirteen and remained stable in Austria and Slovenia. The highest increases were registered in Cyprus (14.4% to 16.8%), Greece (26.3% to 28.0% between November 2012 and November 2013), Croatia (17.4% to 18.8%), Italy (11.8% to 12.9%) and the Netherlands (6.0% to 7.1%). The largest decreases were observed in Latvia (14.3% to 11.5% between the fourth quarters of 2012 and 2013), Portugal (17.6% to 15.3%), Hungary (11.1% to 8.8% between December 2012 and December 2013), Ireland (13.8% to 11.9%), and Lithuania (12.8% to 11.3%).“ Employment and growth It becomes evident that apart from the unseen before unemployment rates in the south of Eurozone, unemployment increases even in Holland, a core EU country. Of course there are good reasons for all those negative developments. Deleveraging and rebalancing of financial accounts by all and every economic agent has spread from the sovereigns and the banking sector to consumers and private businesses. As stated above, if the small increases in the export order books of industrial firms were not real, this core economic sector would have receded and with it, the anemic overall growth would have been reversed towards the negative part of the graph. Unfortunately, the news from the rest of the world is not encouraging and the demand for European exports may fall sharply. The expected outflow of capital from the developing world may accelerate. If this will be the case, a large number of developing countries will be obliged to apply austerity policies, with negative repercussions on growth rates or even recession. In such an environment, EU exports will pay a dear price and the anemic growth rates will disappear. All in all, if the EU consumer doesn’t wake up soon to trigger an internally driven strong growth Eurozone will continue oscillating above and below the zero level of the graph.