Eurozone unemployment hits record, Slovenia downgraded

Eurozone unemployment hits record, Slovenia downgraded

European unemployment hit a new record on Tuesday and Moody's cut Slovenia's debt rating to junk status as German Chancellor Angela Merkel defended her crisis strategy, pushing for twin goals of fiscal rigour and growth.

Spanish job seekers queue outside an employment office in Madrid, on September 4, 2012. European unemployment hit a new record on Tuesday and Moody's cut Slovenia's debt rating to junk status as German Chancellor Angela Merkel defended her crisis strategy, pushing for twin goals of fiscal rigour and growth.

Merkel was speaking during a visit to Berlin by Italy's new Prime Minister Enrico Letta, who said this week that "Italy is dying from austerity alone" but in Berlin also pledged to stick to the path of fiscal consolidation.

The leaders met on a day when grim new data showed that European unemployment set a fresh record in March with more than 19 million jobless people -- including one out of four under-25-year-olds.

In more bad news, the international ratings agency Moody's downgraded Slovenia by two notches to junk status, with a negative outlook, and warned that the eurozone member might need a bailout.

Slovenia had already called off a bond action, saying the sale of around $3.0 billion (2.2 billion euros) in five and 10-year dollar-denominated bonds had been "delayed to a likely credit rating move."

Moody's then cut the country's sovereign debt rating to "Ba1" from "Baa2", placing it in the speculative category, and added that uncertain funding prospects had heightened "the probability that external assistance will be needed".

Huge volumes of risky loans by Slovenian banks, a recession and a yawning public deficit have sparked fears that Ljubljana might soon become the next eurozone member to need outside help.

The news dropped among a heated debate on how to fix problems faced by the 17-member eurozone, which is pitting austerity champions Germany and Finland against crisis-hit countries which demand pro-growth measures.

Merkel faces a growing chorus of opposition, from France and southern Europe as well as the International Monetary Fund, which has warned of a downward spiral of belt-tightening and recession.

But on Tuesday the German chancellor insisted it was not an either-or question.

"For us in Germany, budgetary consolidation and growth are not at cross-purposes but have to go hand in hand to lead to greater competitiveness and therefore more jobs," she said.

Merkel said the aim was for "Europe to emerge stronger from the crisis" and to restore confidence, with each country handling its unique challenges.

Letta said that Italy, after two months of political deadlock, "is emerging stronger from this crisis" and pledged the country would "stick to the path of budget consolidation and fixing public finances."

"As we have said all these months, regarding the commitments every country has toward the EU, we have done our part," he said, according to a German translation.

Letta was also to visit Paris and Brussels and then expected in Madrid on May 6.

Merkel stressed that fighting unemployment was the "core issue" for Europe and would require steps that lead to more investment, "breathing space" for companies and less bureaucracy.

The Eurostat data agency reported an extra 62,000 people joining unemployment queues in just four weeks in the eurozone as the jobless rate climbed for the 23rd consecutive month -- hitting 12.1 percent in March.

The frightening new figures -- which showed almost two in three under-25s in Greece and Spain unemployed -- come amid vocal criticism over the effects on jobs of the cost-cutting measures pushed by austerity advocates.

The German Socialist head of the European Parliament Martin Schulz, said in a message to Italy that "austerity is suffocating not only Italy but also many eurozone countries" and called for "urgent measures to give oxygen to the economy and give back hope to young people."

But in a message of congratulations to Letta, European Commission chief Jose Manuel Barroso appeared to echo Berlin's line despite having said last week that austerity might have reached its limits due to a lack of political and social support.

"I am ... certain that I can rely on your commitment to carry on the process of necessary reforms," he wrote.

There have been signs nonetheless of a softening on austerity after Brussels granted Spain more time to meet deficit targets and the EU agreed to extend loan repayment terms to Portugal and Ireland.

Anger against austerity is rising across Europe as hard economic data fails to show a turn-around.

Greece saw joblessness climb relentlessly to 27.2 percent in January, the latest available figures, from 26.3 percent in December.

Meanwhile Portugal, with unemployment at 17.5 percent in March, was seeking to agree new austerity measures after its Constitutional Court rejected as discriminatory cuts to civil servant salaries and pensions decided in response to demands by EU-IMF lenders.

In Cyprus, which saw a huge month-to-month rise in unemployment to 14.2 percent against 10.7 percent the previous month, the parliament was to debate the terms of a tough 10-billion-euro EU-IMF bailout.

The EU's employment and social affairs commissioner Laszlo Andor warned that "EU institutions and governments, business and social partners at all levels need to do all they can to avoid a 'lost generation'".

Do you like the content of this article?
COMMENT