|Friday, 01 March 2013|
|Italy’s voters gave their verdict on the austerity medicine they’ve been forced to take when they went to the polls earlier this week. By Friday, one of the reasons behind the protest was highlighted when the country’s unemployment hit its highest level in at least two decades.Official figures Friday showed that unemployment in the country in January rose to 11.7 percent from the previous month’s 11.3 percent. January’s figure was the highest since the current way of measuring unemployment was introduced in 1992.
The unexpectedly large monthly spike was one of the key backdrops to the election results earlier this week that reignited concerns over Europe’s dormant debt crisis. No party, or coalition of parties, emerged with enough votes to govern alone, triggering uncertainty in the markets about the future course of Italian economic policy.
The rise in the Italian rate, which comes as the country is stuck in an 18-month recession and after a wave of economic reforms and tight budgetary controls introduced to control the country’s debt, was also the main reason why unemployment across the 17 European Union countries that use the euro rose to a record 11.9 percent during January from the previous month’s 11.8 percent.
Eurostat, the EU’s statistics office, said nearly 19 million people were unemployed in the eurozone following an increase of around 200,000 in January.
The increase was not a particular surprise given that the eurozone economy as a whole is in recession and expected to continue to contract in the first half of 2013. In the final three months of 2012, the eurozone contracted by a quarterly rate of 0.6 percent, with eight countries in recession – officially defined as two straight quarters of negative growth.
Even if growth does emerge in the eurozone, as some recent economic indicators have suggested, it usually takes time for unemployment to start falling – it is widely considered to be a lagging indicator. And high levels of unemployment make it even more difficult for economies to recover and for governments to get their public finances into shape.
Even though concern in the financial markets over the eurozone’s problems of too much government debt has calmed recently, there appears to be a rising groundswell among people against austerity, which has been prescribed as the main cure. The inconclusive Italian elections were just the latest manifestation of that protest – others include regular protests in Spain and Portugal, as well as the rise of right-wing extremists in Greece.
“High and still rising unemployment rates are probably the single most important threat to the mid to long-term economic stability of the eurozone,” said Marie Diron, senior economic adviser at Ernst & Young. “As electorates fail to see the benefits of fiscal and economic reforms, we could see rising social tensions weakening governments and raising the possibility of a popular vote to exit the euro. In this context, it is essential to emphasize growth-enhancing reforms.”