Eurozone jobless rise confirmed as recession tests social fabric

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Unemployment in the 17-country eurozone hit a record high of 11.6 per cent in September, the latest official figures show in a sign the economy is deteriorating as governments struggle with the debt crisis.

The rate reported by Eurostat, the EU’s statistics office, was up from an upwardly-revised 11.5 per cent in August. In total, 18.49 million people were out of work in the eurozone in September, 146,000 more than the previous month, the biggest increase in three months.

While the eurozone’s unemployment rate has been rising steadily for the past year as the economy struggled with a financial crisis and government spending cuts, the United States has seen its equivalent rate fall to 7.8 per cent. The latest US figures are due tomorrow.

The figures came yesterday as Greece outlined more austerity measures for the next two years – and unions responded by announcing a 48-hour general strike.

The protest is timed for for next week, when the measures demanded by Greece’s international creditors must get parliamentary approval.

The 13.5bn euros (£10bn) cutbacks for 2013-14 include a two-year increase in the retirement age – from the current average of 65– salary and pension cuts and more tax increases, including raising duties on interest on bank deposits from 10 to 15 per cent.

Most measures – revealed in a draft budget - will come in next year. Parliamentary approval is essential if Greece is to get the next instalment of bailout loans. Without these, the country has said it will run out of money on November 16.

More widely, with the eurozone economy fading, most economists think unemployment will keep increasing over the coming months. Five countries in the eurozone are already in recession – Greece, Spain, Italy, Portugal, and Cyprus – and others are expected to join them soon.

The region as a whole is expected to be confirmed to be in recession when the first estimate of eurozone economic activity in the third quarter is published mid-November – a recession is officially confirmed after two consecutive quarters of negative growth.

“With surveys suggesting that firms are becoming more reluctant to hire, the eurozone unemployment rate looks set to rise further, placing more pressure on struggling households,” said Ben May, European economist at Capital Economics.

Recession and unemployment make it more difficult for the eurozone to deal with its debt problem – as governments pay more benefits to the jobless and receive less tax revenue. This may push countries to take even more austerity measures, further lessening economic activity.

Spain again had the highest unemployment rate in the eurozone, at 25.8 per cent, although Greece may yet surpass this as unemployment rate mushroomed to 25.1 per cent in July, the latest available figure, and is due to increase in the face of what many economists are calling an economic depression.

The country is forecast to enter its sixth year of recession next year.

Both countries, which are at the heart of Europe’s three-year debt crisis, have youth unemployment above 50 per cent.

That risks creating a lost generation of workers and is straining the countries’ social fabric. Extremist political groups in Greece and regional separatist parties in Spain have grown in popularity as the economy worsened.

Concern over the social impact of unemployment has also weakened governments and hobbled political decision-making.

In Greece, the three parties in the coalition government have tried for months to agree an austerity package necessary for the release of loans.