Eurozone unemployment stuck until 2015, warns European commission

Commission warns jobless total will remain at record 12.2% in 2014, as growth forecast drops to 1.1%

The European commission is warning that it is too early to claim victory in the euro area's fight against recession after its latest forecasts showed it would be 2015 before weak growth generated a fall in the jobless total.

Although the 17-nation single currency zone started to expand in the summer after a six-quarter double-dip recession, Brussels said there will be a lag before the pickup in activity leads to a fall in unemployment.

The commission trimmed its growth forecast for the euro area in 2014 from 1.2% to 1.1% and said unemployment will remain stuck at a record 12.2% next year. It added that there were encouraging signs that the recovery would continue but said the legacy of Europe's debt crisis would continue to act as a brake on growth.

Only in 2015, when growth is expected to increase to 1.7%, does the commission see a dent being made in the jobless total, with unemployment predicted to drop to 11.8%.

Olli Rehn, the commission's vice-president for economic and monetary affairs and the euro, said: "There are increasing signs that the European economy has reached a turning point. The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery.

"But it is too early to declare victory: unemployment remains at unacceptably high levels. That's why we must continue working to modernise the European economy, for sustainable growth and job creation."

The commission, publishing forecasts three times a year for the eurozone and the EU, stresses that the return to solid growth in the countries that belong to the monetary union is set to be gradual, with big differences in economic performance across member states. Financial markets believe the combination of sluggish growth, high unemployment and the threat of deflation will prompt the European Central Bank into fresh efforts to boost activity.

Of the bigger euro area countries, only Germany is forecast to grow by more than 1% in 2014. Spain is expected to expand by 0.5%, Italy by 0.7% and France by 0.9%.

By contrast, the commission said the outlook for the UK – which has exceeded expectations in 2013 – was "quite bright". Growth of 2.2% is pencilled in for 2014, rising to 2.4% in 2015.

Article Source : http://www.guardian.co.uk
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