Figures released by Eurostat yesterday (31 July) showed that unemployment in the euro area increased to 11.2% in June, up from 11.1% in May—roughly 17.8 million people were without jobs in June, up by 123,000 from May.
Spain, which is at the forefront of Europe's debt crisis concerns, had the highest unemployment rate at 24.8%. Greece's rate was not far behind at 22.5%, though the latest figures available are for April. Many other eurozone countries, including France and Italy, also have double-digit unemployment rates.
Unemployment in Italy rose in June to its highest level in nearly 13 years to a seasonally-adjusted 10.8%, according to the Rome-based national statistics office, Istat.
Young people are in dire straits, with those aged 15 to 24 unemployed at a rate of 34.3% in June. In addition, the economy shrank for a third straight quarter. Italy is now in its fourth recession since 2001.
Germany, Europe's biggest economy, continues to fare far better, and its unemployment rate, according to Eurostat, dropped to 5.4% in June from the previous month's 5.5%. However, recent figures released by Germany's Federal Labor Agency showed that Germany’s economy might also be hit as the unadjusted rate climbed from 6.6% in June to 6.8% in July.
Portugal’s unemployment rate was 15.4%, Ireland’s was 14.8%, and France’s was somewhat better at 10.1%.
The gloomy unemployment outlook has put further pressure on the European Central Bank to act and contain the sovereign debt crisis, when it meets tomorrow (2 August).
Last week, ECB president Mario Draghi said the bank would do ‘whatever it takes’to safeguard the euro, fuelling investors’ hopes that the central bank would buy Spanish and Italian bonds in an effort to bring borrowing costs under control.
But several other pieces have to fall into place before the ECB will act decisively, insiders say. These include a request for assistance from Spain, which Madrid is still resisting, a decision by euro zone leaders to let their bailout fund buy bonds at auction, and a German court ruling on the legality of the euro zone's permanent rescue fund, due on September 12.
Above all, ECB President Mario Draghi must overcome the resistance of Germany's powerful central bank.
The Bundesbank declared its opposition to reviving the dormant bond-buying program, arguing that it would remove market pressure on heavily indebted governments to pursue austere budget policies and economic reforms.
"The mechanism of bond purchases is problematic because it sets the wrong incentives," a spokesman for Bundesbank President Jens Weidmann told Reuters.
The Bundesbank has also consistently opposed other ideas - such as giving the euro zone's rescue fund a banking license and letting it borrow from the central bank to fight fire in the bond markets - on the grounds that they breach a European Union treaty prohibiting monetary financing of governments.
Draghi and Weidmann will have a chance to thrash out their differences when they meet before Thursday's monthly meeting of the Governing Council. The outcome of this struggle between the ECB and the German parent on which it was modeled may determine whether the euro survives