Euro Zone Crisis
The euro zone crisis was triggered in 2009 when Greece's debts, left by its previous government, reached a record 300 billion euros, leaving the southern European economy with debt levels more than four times higher as a proportion of gross domestic product than the official euro zone cap of 60 per cent of GDP. Since the original problems were uncovered, Greece has been bailed out twice, and lenders have also had to rescue Ireland and Portugal. In the latter half of 2012. Cyprus also required a bailout.
Euro zone unemployment hits record 12.2pc
Unemployment across the 17 EU countries that use the euro hit another record high in April, official figures showed on Friday, the latest in a series of ignominious landmarks for the ailing single currency zone.
Eurostat, the EU’s statistics office, said on Friday that unemployment rose to 12.2 per cent in April from the previous record of 12.1 per cent the month before. Another 95,000 people joined the ranks of the unemployed, taking the total to 19.38 million. At this pace, unemployment in the euro zone could breach the 20 million mark this year.
The figures, once again, mask big disparities among countries. While over one in four people are unemployed in Greece and Spain, Germany’s rate is stable at a low 5.4 per cent.
The differences reflect the varying performance of the euro economies – Greece, for example, is in its sixth year of a savage recession. Germany’s economy has until recently been growing at a healthy pace.
As a whole, the euro zone is in its longest recession since the euro was launched in 1999. The six quarters of economic decline is longer even than the recession that followed the financial crisis of 2008, though it’s not as deep.
Part of the cause has been European governments’ focus on cutting debt by raising taxes and slashing spending programmes.
With many governments still pulling back on spending and business and consumer confidence still low, economists do not expect any dramatic recovery to emerge over the coming months.
The European Central Bank has sought to make life easier for Europe’s hard-pressed businesses and consumers by cutting its main interest rate down to the record low 0.5 per cent earlier this month.
Another cut is possible, though unlikely, economists say, even though the inflation rate still stands below the ECB’s target of just below 2 per cent. The ECB is more likely to take measures to shore up lending to small and medium-sized businesses, one of the main job creators.
Separately, Eurostat said on Friday that inflation in the euro zone rose to 1.4 per cent in the year to May from 1.2 per cent the previous month. It blamed rising food, alcohol and tobacco prices for the uptick.