Euro jobless scourge seen defying leaders’ 120-bln-euro billion push
Ian Wishart & Kristian Siedenburg
European Union leaders pondering the fruits of a 120 billion-euro ($163 billion) push to jump-start the economy and create jobs can look to data this week for evidence of how little has been achieved.
The euro-area unemployment rate probably held near a record in November at 12.1 percent, according to the median estimate in a Bloomberg News survey of economists. That report on Jan. 8 follows tomorrow’s release of December consumer-price data. Analysts see inflation hovering near the four-year low that preceded a surprise interest-rate cut a month earlier by the European Central Bank.
In December, EU leaders acknowledged their struggle to create jobs, 18 months after they unveiled the Compact for Growth and Jobs, saying unemployment remains “unacceptably high.” Governments are relying for continued support from the ECB, which may this week repeat its vow to keep its policy accommodative for “as long as necessary.”
“Unemployment is bound to remain high amid a sluggish recovery,” said Tobias Blattner, senior economist at Bank of America Merrill Lynch in London. “And with credit remaining scarce and expensive in large parts of the euro area, inflation will fail to creep higher. Deflation fears, however, are unlikely to materialize.”
The euro was little changed against the dollar today, trading at $1.3579 at 8:36 a.m. in Brussels. The Stoxx Europe 600 Index was up 0.6 percent at 327.64.
With the euro-zone economy battered by the debt crisis and slow to shake off a record-long recession, policy makers are struggling to find a recipe for growth. The ECB estimates that the euro-area economy contracted 0.4 percent in 2013 and will expand 1.1 percent this year.
Meager growth has forced European companies to shed jobs in a bid to cut costs and remain competitive. Last month, European Aeronautic, Defence and Space Co. said that it would cut 5,800 jobs in Germany, France, Spain and the U.K. Veolia Eau France said that it would open talks on about 700 voluntary departures.
Such staff reductions will keep the jobless rate at 12.1 percent on average this year, before dipping in 2015, according to a Bloomberg survey of economists.
When EU leaders announced their growth and jobs initiative in June 2012, the unemployment rate was 11.4 percent. Their program of “fast-acting growth measures” included earmarking 55 billion euros of structural funds for small business and youth employment. They also added 10 billion euros to the capital of the European Investment Bank, “increasing its overall lending capacity by 60 billion euros.”
In Spain, which has the euro area’s second-highest unemployment rate, the number of jobless fell by 107,600 in December from the previous month to 4.7 million, the Labor Ministry in Madrid said last week.
By contrast, economists forecast the German jobless rate as defined by national standards, set for release tomorrow, to remain at 6.9 percent, a Bloomberg survey shows. The level comparable with other euro countries was 5.2 percent in October, the second-lowest after Austria, while Greece has the highest rate at 27.4 percent.
Euro-zone unemployment “is likely to stay at a very high level for some considerable time to come,” said Howard Archer, chief European and U.K. economist at IHS Global Insight in London. “That’s got to have a limiting impact on consumer spending, particularly when you think how weak wage growth is in most countries.”
Tomorrow’s euro-area December inflation report will probably show consumer prices grew 0.9 percent from a year earlier, the same rate as a month earlier. The EU’s statistics agency in Luxembourg will publish the inflation data at 11 a.m. local time and the unemployment numbers at the same time on Wednesday.
After cutting its main refinancing rate to a record-low 0.25 percent in November, the ECB sees “no immediate need to act” further on “encouraging signs” that the euro area’s crisis is easing, President Mario Draghi said on Dec. 28 in an interview published in Der Spiegel.
The ECB will leave its key rate unchanged on Jan. 9, according to all 50 economists in a Bloomberg News survey.
This week’s “data will likely provide a message similar to that of the previous months: low inflation in an environment of an uneven recovery,” said Jacques Cailloux, chief European economist at Nomura International Plc in London. “The ECB is getting what it expected, so it’s hard to see them responding with any kind of action. Individual economies aren’t improving at the same speed, but overall there’s no indication that the euro-area recovery is faltering.”
The nascent recovery is reflected in improving economic confidence. The European Commission will publish the results of its December survey on Jan. 9, with the gauge forecast to rise to 99.1, the highest since July 2011, according to a Bloomberg survey of economists.