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Austerity’s grip on Europe becomes a stranglehold as unemployment rises

After four years of economic and financial misery, has Europe’s job market finally bottomed out? Don’t count on it, even though German business confidence is rising, lifting hopes that the continent’s industrial dreadnought will keep the European fleet afloat. For job seekers, austerity continues to be problem.

Alvaro Barrientos/AP

After four years of economic and financial misery, has Europe's job market finally bottomed out? Don't count on it, even though German business confidence is rising, lifting hopes that the continent's industrial dreadnought will keep the European fleet afloat.

For job seekers, austerity continues to be problem. Even though it is generally agreed that austerity alone will not fix Europe's dud economies – growth measures also have to be thrown into the mix – new tax hikes and spending cuts keep arriving. A few days ago, Italy approved a one-percentage point increase in the value-added tax, ostensibly to help fix Italy's finances. It could have the opposite effect by draining away even more consumer spending power, in turn translating into less job creation or more job losses.

A new European Commission survey said that confidence among consumers in the 17-country euro zone has hit a 42-month low as austerity works its dark magic. This is bound translate into no improvement in the unemployment numbers to be released on Friday by Eurostat, the European Union's statistical agency. A month ago, official figures showed the zone's jobless rate rose to 11.6 per cent in October, the highest on record, from 11.5 per cent in September. In the wider EU, made up of 27 countries, the jobless rate was 10.6 per cent in September, unchanged from the previous month.

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Since then, the EU and the euro zone have seen more bad news than good, making it unlikely the jobs scene will improve. The European Commission (the EU's executive arm) cut its 2013 growth forecast for the euro zone. The new estimate is for 0.1 per cent growth – flatlining, in other words – compared to its previous forecast of 1 per cent. The call for this year is for an economic contraction in the euro zone of 0.4 per cent, with the EU shrinking by 0.3 per cent.

Meanwhile, layoffs continue at an impressive rate. In recent weeks, turbine maker Vestas, wireless equipment maker Ericsson and ING, the Dutch bank, have announced 7,000 job losses. UBS alone killed off 10,000 jobs, most of them in Europe and most of them high paying.

The EC's guess is that unemployment will not start falling until 2014, and even then only slightly. "The ongoing post-financial crisis correction continues to weigh heavily on economic activity and employment in the EU," it said.

As usual, it is the Mediterranean countries where the jobless tally is highest. Spain's unemployment rate has hit 25 per cent and some forecasts put it at 26-to-27 per cent next year. Italy's jobless numbers are also soaring. They don't need to be told that austerity might be going too far.

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About the Author
European Columnist

Eric Reguly is the European columnist for The Globe and Mail and is based in Rome. Since 2007, when he moved to Europe, he has primarily covered economic and financial stories, ranging from the euro zone crisis and the bank bailouts to the rise and fall of Russia's oligarchs and the merger of Fiat and Chrysler. More

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