Unemployment in the Euro zone has reached its highest level since the euro currency was introduced in 1999, according to Eurostat, the statistical arm of the European Union (EU).
The jobless rate hit 10.4 percent in December in the seventeen nations that make up the currency block, slightly above the 10.3 percent figure from the prior month. That translates into about 16.5-million unemployed Europeans – an increase of three-quarters of a million from the previous year.
Spain has the highest jobless rate in the euro zone (22.9 percent), while Austria has the lowest (4.1 percent).
However, unemployment in the Euro zone strongest economy, Germany, fell to 6.7 percent, a record low for the re-unified Deutschland.
Unemployment remains an intractable problem, given recessionary conditions in several European nations, and planned austerity programs by debt-scarred governments. Not surprisingly, joblessness climbed the most in Greece and Spain last year.
An Euro area economist at Citigroup, Guillaume Menuet, told BBC he is very pessimistic that joblessness will ease in Europe this year.
If you think about the direction of employment expectations that you see across various business surveys, the outlook for employment doesn't look particularly enticing, simply because the uncertainty is very high,” he said.
In many cases you find firms continuing to delay investment projects. For those that are still making profits, hiring is being frozen, and for those which are under pressure to hit results or losing money, job losses are becoming the only solution that they have.”
Similarly, Martin van Vliet, an economist at ING, gloomily warned: We're looking at a further increase over the coming months, so that is worrying. Look at Greece, where unemployment is some 20 percent, and it is 23 percent in Spain. At a certain point this could lead to political unrest.
Van Vliet added: For me this is the most painful aspect of the whole situation we're facing in Europe, this great divergence on the labor market. Because if unemployment in Germany is falling, we may see less preparedness to help out the rest of the euro zone.
Euro zone leaders are currently meeting in Brussels, already having vowed to kick-start the continent’s economies by focusing on job-creation.
Denmark’s Prime Minister Helle Thorning-Schimdt told reporters in Brussels on Monday: It's very important that we don't forget the growth and the jobs. Everything starts and ends with growth and jobs.”
Howard Archer, the chief UK & European Economist at IHS Global Insight in London, warned: “With the Euro zone likely to have suffered GDP contraction in the fourth quarter of 2011 and in serious danger of enduring a further decline in the first quarter of 2012 at least, and with business confidence weak, the likelihood is that the Euro zone unemployment rate will move significantly higher, although the situation is likely to vary appreciably across countries.”
Archer said there exists a real risk that the Euro zone unemployment rate could reach 11.0 percent in 2012.
“Companies are under serious pressure to keep their labor forces as tight as possible to contain their costs in the face of current weakened demand, squeezed margins, strong competition and uncertain growth outlooks,” he stated.
“Furthermore, public-sector jobs are likely to be pared in a number of countries going forward as part of the austerity measures that are increasingly being implemented.”