Can the national and age groups pockets of unemployment cause irreparable damages to Eurozone?

Marianne Thyssen, Member of the European Commission in charge of Employment, Social Affairs, Skills and Labor Mobility, gave a press conference after the EC proposed to make 1 billion euro from the Youth Employment Initiative available as early as this year. (EC Audiovisual Services, 04/02/2015).

Marianne Thyssen, Member of the European Commission in charge of Employment, Social Affairs, Skills and Labor Mobility, gave a press conference after the EC proposed to make 1 billion euro from the Youth Employment Initiative available as early as this year. (EC Audiovisual Services, 04/02/2015).

It’s a bit awkward to consider a drop of the unemployment rate by one decimal point of a percentage unit as economic growth, and call it a reversal to the positive region, as some Brussels dignitaries and bureaucrats do. Incidentally, the euro area unemployment rate fell to 11.3% in February, down from 11.4% in January 2015. At the same time though retail trade sales and inflation are in the negative region, despite the €60 billion the European Central Bank pumped into Eurozone during March, through purchases of government bonds and asset backed securities.

In early May the Commission is expected to publish its Spring European Economic Forecast 2015. “It will cover 2014, 2015 and 2016 and will include data on Gross Domestic Product (GDP), inflation, employment, budget deficits and public debt, amongst others”. As usually it will be overoptimistic and predictably it will assert that the EU economy has entered a virtuous cycle. But is there enough evidence to support such a sanguine view? Let’s take one thing a time.

Statistical evidence

At the end of March, Eurostat, the EU statistical service, announced its estimate for the February unemployment rate. The relevant Press release says that “The euro area (EA19) seasonally-adjusted unemployment rate was 11.3% in February 2015, down from 11.4% in January 2015, and from 11.8% in February 2014. This is the lowest rate recorded in the euro area since May 2012”. Nevertheless, in reality this change falls well into the area of statistical error.

It is also obvious from the above quote of Eurostat’s Press release that the unemployment rate of February 2015 compared with this same month of the previous year marks a rather noticeable drop. Half a percentage unit is not a small thing but it’s not a cause for celebration either. The problem is that according to the same source still in February this year “23.887 million men and women in the EU28, of whom 18.204 million in the euro area, were unemployed in February 2015. Compared with January 2015, the number of persons unemployed decreased by 91 000 in the EU28 and by 49 000 in the euro area”.

A large country producing nothing?

This is the equivalent of an entire large European country being completely unemployed producing nothing at all. Back to reality, the actual picture is quite discouraging if one focuses on the south of the EU. In today’s Greece more than a quarter of working age population is jobless. The same hopeless condition prevails in Spain with 23.2% of the workers not having work, Croatia with 18.5% unemployed, Cyprus with 16.3% and Portugal 14.1%. If you think that this are small peripheral member states, what about Italy suffering from unemployment of 12.7% and France of 10.6%? In short, the second the third and the fourth economies of Eurozone are in the red labor market wise.

As for the youths (under 25) their condition appears quite appalling. In Greece and Spain more than 50% of them don’t have a job and 42.6% of their Italian counterparts are suffering of the same chronic disease. At the same time some core EU member states like Germany and Austria seem rather immune to this virus, with only single digit youth unemployment rates. Then the ugly reality comes into view proving that the EU labor market is not only in a dreadful state, but it shows a deep fragmentation in national segments.

What about the future?

Unfortunately, the future looks equally gloomy because the crucial indicator of the retail sales points downwards. According to Eurostat, “In February 2015 compared with January 2015, the seasonally adjusted volume of retail trade fell by 0.2% in the euro area (EA19) and remained stable in the EU28”. Retail sales are an infallible gauge of consumption. This last crucial variable is in its turn the main component of gross national product and revenue. Therefore retail sales can be considered as an early pointer of the future trends in overall economic activity. Consequently, a drop in retail sales can invariably lead to a drop in aggregate product and income.

Last but not least developments in the prices front are also hardly encouraging. Headline inflation (consumer prices) remains in the negative part of the chart. According to a Eurostat flash estimate for March inflation in the euro area was -0.1%, that is two decimal points up from -0.3% in February. Producer price inflation developments were also negative. In February they rose by 0.5% in the euro area but only after they had retreated by -1.1% in January. Unfortunately, in this crisis conjuncture we are in for more than five years negative or close to zero inflation rates which are considered risks of existential proportions.

Summing up all that, it becomes apparent that unemployment and economic activity in the euro area will continue to pose grave problems in the foreseeable future. The trouble is that if the long-term economic stagnation that Eurozone suffers continues, the damages caused may be irreversible, although some already are like the lost generation in the South. The pockets of shockingly high unemployment in certain southern countries and age groups may lead to political reversals of unpredictable consequences.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Featured Stings

France fails again the exams. Kindly requested to sit in on Commission’s class

“Is Europe innovative? Oh, Yes we are very innovative!”, Director General of the European Commission Mr Robert-Jan Smits on another Sting Exclusive

CDNIFY @ TheNextWeb 2014

European Court rules that ECB’s OMT program of 2012 is OK; not a word from Germany about returning the Greek 2010 courtesy

COP21 Breaking News_09 December: The Draft Agreement Updated

On European immigration: Europe’s Missing Citizens

Commission’s spending totally uncontrolled

Can Obama attract Iran close to the US sphere of influence?

ECB’s new money bonanza handed out to help the real economy or create new bubbles?

Elections in Britain may reserve a surprise for May’s Tories

European Union disenchanted with Turkey

Germany tries to save Europe from war between Ukraine and Russia

Unemployment and stagnation can tear Eurozone apart if austere policies persist

A new Europe for people, planet and prosperity for all

Will ECB win against low inflation by not following Quantitave Easing?

The EU Commission implicates major banks in cartel cases, threatens with devastating fines

“None of our member states has the dimension to compete with China and the US, not even Germany!”, Head of EUREKA Pedro Nunes on another Sting Exclusive

South Eurozone needs some…inflation and liquidity

Young and unemployed the perfect victims of ‘vultures’

Berlin favours economic and social disintegration in certain Eurozone countries

Historical success for the First ever European Presidential Debate

D-Day for Grexit is today and not Friday; Super Mario is likely to kill the Greek banks still today

The Commission sees ‘moderate recovery’ but prospects deteriorate

Global Talent – Professional Internships

SPB TV @ MWC14: The TV of the Future

Greece and Ukraine main items on EU28 menu; the course is set

Opening Remarks by H.E. Ambassador Yang Yanyi, Head of the Chinese Mission to the EU at the Chinese Fashion Night

ECB describes in detail how it exploits the poor

European Young Innovators Forum @ European Business Summit 2014: Europe for StartUps, vision 2020

The next EU President will first have to drink his tea at Downing Street

Young people are Europe’s biggest value and hope

EU leaders slammed on anti-tax evasion inaction and expensive energy

Draghi reserved about Eurozone’s growth prospects

Kellen Europe Hosts EuroConference 2016

The EU patent space and Unified Court are born

Mario Draghi didn’t do it but Kim Jong-un did

A European Discovers China: 3 First Impressions

E-Government can be a remedy for the crisis

Inegalitarian taxation on labour haunts Europe’s social model

Public opinion misled by the Commission on air transport safety

Young people all over the world come together to demand paid good quality internships

Commissioner sings “Volar-e” but the European driver no “Cantar-e”

Lithuania finds the ways to maintain its energy security

Commission’s Youth Initiative fails first hurdle by not sufficiently consulting young people

Last-chance Commission: Why Juncker promised investments of €300 billion?

From Russia with love: Brussels and Moscow close to an agreement on Ukraine’s gas supplies

Greece returns to markets at a high cost to taxpayers, after four years out in the cold

How many more financial crises in the West can the world stand?

A Sting Exclusive: EU Commission’s Vice President Šefčovič accentuates the importance of innovation to EU’s Energy Union

Tax evasion and fraud threaten the European project

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s