Friday

19th Aug 2022

Hundreds of thousands more jobs to go, EU warns

  • Rehn: "reforms ... should begin to bear fruit" (Photo: ec.europa.eu)

About 730,000 more people will lose their jobs in the EU before the economic crisis starts to ease off, the European Commission said on Wednesday (7 November).

The grim outlook, part of the commission's regular economic forecasting, is based on a prediction the jobless rate in the Union will go from 10.6 percent today - already a record number - to 10.9 percent next year before dropping to 10.7 percent in 2014.

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The rate will climb to 26.6 percent in Spain and 24 percent in Greece next year, with double-digit levels in 11 other member states.

The commission also said the EU's economy will keep on shrinking this year, but begin to grow by 0.4 percent next year.

At the same time, government deficit and debt levels will keep on getting smaller.

The turnaround will not be felt in some parts of the Union. The Cypriot, Greek, Italian, Portuguese, Spanish and Slovenian economies will contract in 2013. Government deficit levels will stay above the EU's 3-percent-of-GDP-marker for sound finances in 11 countries. British, Irish and Spanish government borrowing is to stay at more than twice the EU rule.

For his part, EU economic affairs commissioner Olli Rehn told press in Brussels the bitter pill of EU-mandated austerity is beginning to work.

"The structural reforms undertaken should begin to bear fruit over the forecast period," he said.

But with the International Monetary Fund recently joining economists such as Nobel winner Paul Krugman in saying that too much austerity and not enough stimulus will stymie recovery, Rehn admitted the budget cuts are problematic.

"The large internal and external imbalances that built up in the pre-crisis years are being reduced, but this process continues to weigh on domestic demand in some countries," he added.

Amid urgent risk of bankruptcy in Greece and the prospect of two more EU bailouts - for Cyprus and Spain - Rehn also noted that sovereign bond markets still pose a threat to stability.

"Major policy decisions have laid the foundations for strengthening confidence ... [but] difficulties in parts of the banking sector and the weak economy are likely to continue to weigh on credit supply," he said.

In a rare moment of levity amid speculation on the survival of the euro, an audience member's mobile gadget accidentally played a funeral march in the press room while the Finnish official was speaking.

The tune "might be appropriate" for the subject at hand, Rehn quipped.

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Rather than a deal, the US fiscal cliff talks reflect still another delay. However, the time will run out in the next 4-8 weeks. The net effect will reverberate across Europe and the world economy, writes Dan Steinbock.

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