Crumbs of comfort don't hide Europe's employment divide

The top headline is not bad news. Eurostat estimates that there are 840,000 more people in work than this time last year, although there are still more than 17.7 million unemployed in the currency bloc.

Meanwhile, Spain and Ireland - both of whom have received some form of EU bailout in recent years - are creating new jobs at the quickest rates in the EU. But the top-line unemployment rate hides the gaping divide between Europe’s rich and poor countries. Of the EU’s south Mediterranean countries, for example, only tiny Malta has an unemployment rate that is lower than the eurozone average.

Germany, the bloc’s most hawkish creditor in the Greek debt crisis, has the lowest unemployment rates in the EU at 4.7 percent, closely followed by the UK and Malta on 5.4 percent and 5.6 percent respectively.

However, at the other end of scale, Greece, which will hold a referendum on the latest bailout terms offered by its EU and IMF creditors this weekend, has the highest jobless rate at 26.5 percent. It is also the only country among the 34-member Organisation for Economic Co-operation Development - the think tank often referred to as the world’s ‘rich men’s club’ - not to have seen an increase in GDP per capita between 2007 and 2014

At a fraction under 50 percent, Greece also has the highest level of youth unemployment, closely followed on 49 percent by Spain.

"European labour markets may have turned a corner," said Andrea Broughton of the Institute for Employment Studies, a UK-based think tank, but added there is "still a great deal of variation between member states."

There is also a need for some historical perspective before we get too cheerful about the Eurostat figures.

Unemployment in the eurozone stood at just over 7 percent in early 2008, on the eve of the financial crisis, but soared to a peak of 12 percent in 2013. Since then, as the currency bloc slowly exits a double dip recession, it has gradually edged down across most of Europe but far too slowly.

A report by ECB economists in February forecast that 9.9 percent of the labour market would still be without work by the end of 2017, when the bank’s €1.1 trillion stimulus programme is scheduled to come to an end. In fact, it is a fair bet that unemployment in 2020 will be higher than it was in 2008.

What small economic recovery is taking place across most countries is not creating many new jobs. In France, Finland and Belgium, the dole queues have actually increased over the past year.

The prospect of a ‘jobless recovery’ should worry policy makers, especially if it entrenches the economic divide in the eurozone and becomes a structural millstone for many of its economies.

“In a monetary union you can’t afford having large and increasing structural divergences between countries,” ECB President Mario Draghi said at a conference of economists in Portugal in May. “They tend to become explosive; therefore they are going to threaten the existence of the monetary union.”

“Unemployment in Europe, notably youth unemployment, is not only unbearably high. It is also unbearably different across nations belonging to an economic and monetary union,” Tito Boeri, professor at Bocconi University, and Juan Jimeno, of the Bank of Spain, wrote in a conference paper.

The European Commission and ECB expect the eurozone economy to grow by 1.5 percent this year followed by 1.8 percent in 2016, figures which should support a slow but steady increase in employment.

For the moment, EU politicians don’t seem to have that much to say about reducing structural unemployment. The only proposal of any substance in last week’s Five President’s report on eurozone reform was that each eurozone government should establish a national competitiveness authority.

A welcome innovation perhaps, but more a more pressing concern is how to move away from a situation where a Greek, Italian, Portuguese or Spaniard is three or four times more likely to be without a job than a German.