The jobless rate has reached an all-time high of 26.6pc in Spain, rising to
56.5pc for youth. It is much the same picture in Greece, where unemployment has
spiked from 19pc to 26pc over the past year as austerity bites in earnest, with
Portugal not far behind as it follows suit with draconian cuts. There are now
18.8m people looking for work across the eurozone.
“A widening gap is emerging,” said Laszlo Andor, the European Social Affairs
Commissioner. “Peripheral states appear to be caught in a downward spiral of
falling economic output, rapidly rising unemployment and eroding individual
incomes.”
Mr Andor’s unemployment report said the welfare systems of southern Europe
are unravelling as governments slash benefits, leaving families exposed to the
full brunt of the crisis. The “automatic stabilisers” are no longer functioning
properly.
He said there is a rising risk that the long-term jobless will fall into an
“enormous poverty trap” if the crisis is allowed to drag on. “Severe material
deprivation” has surged to 31pc in Latvia and 44pc in Bulgaria, casting doubts
on claims that these two euro-pegged countries have shaken off the crisis .
Spain’s long-term jobless now number 2m, while the country’s GINI coefficient
measuring inequality has risen from 31.2 to 34 since the crisis began. The report said the biggest single cause of the jobs crisis is a “demand
shock” to the Euroland economy, deeming other factors to be “less relevant”. The
findings reflect deep dissent within the EU policy apparatus over the
contractionary policy settings, and undercut claims by hard-liners that labour
reforms in the Club Med bloc are enough to pull the region out of slump.
Mr Andor’s grim warnings came a day after Commission chief Manuel Barroso
claimed the eurozone crisis had “essentially been overcome”.
Graeme Leach, from the Institute of Directors, said the European Central Bank
has bought time with its bond-buying pledge but the deeper economic crisis
grinds on with a “terrifying” human cost. “The figures are shockingly bad. This
saga is far from over,” he said. The North-South gap makes it very hard for the ECB to run monetary policy for
the whole bloc. Unemployment is just 4.5pc in Austria, 5.4pc in Germany, and
5.6pc in Holland. Real household income, after tax, had fallen 17pc in Greece, 8pc in Spain,
7pc in Cyprus, and 5pc in Ireland between 2009 and 2011, a slide still gathering
speed. Mr Andor said labour market reforms would bear fruit eventually, adding
that the jobless rate may be near its peak in Spain. Jobs data tend to be a lagging indicator so the latest rise in unemployment
may reveal much about economic growth prospects for 2013.