The start of 2013 has been much like late 2012 in terms of stability on the European markets, but I’ve been warning for a few months that the data coming from the real economies of at-risk eurozone nations isn’t playing along. Earlier this week we saw the latest PMI data which showed that Italy, France and Spain are all seeing further signs of economic contraction which, given the relative sizes of these economies, still presents a significant risk to the zone. On top of this the latest data from the ECB shows that private sector lending is still contracting and a number of countries are digging into one-off funds in order to balance the books in the short-term.
I’ve explained previously that the policy response to the economic crisis is one that, in the absence of increased foreign demand, guarantees lower economic activity within the eurozone which in turn is leading to higher unemployment and therefore a reduction of government revenues and a rise in bad debts in the banking system. Markets have obviously been concentrating on sovereign yields as a measure of success, but my own opinion is that you can really only say that the Europe has turned a corner once unemployment begins to fall, and of most concern are those nations already under economic stress.
This brings us to last night Eurostat report on European unemployment:
The euro area (EA17) seasonally-adjusted unemployment rate was 11.8% in November 2012, up from 11.7% in October. The EU27 unemployment rate was 10.7% in November 2012, stable compared with October. In both zones, rates have risen markedly compared with November 2011, when they were 10.6% and 10.0% respectively. These figures are published by Eurostat, the statistical office of the European Union.
Eurostat estimates that 26.061 million men and women in the EU27, of whom 18.820 million were in the euro area, were unemployed in November 2012. Compared with October 2012, the number of persons unemployed increased by 154 000 in the EU27 and by 113 000 in the euro area. Compared with November 2011, unemployment rose by 2.012 million in the EU27 and by 2.015 million in the euro area.
Among the Member States, the lowest unemployment rates were recorded in Austria (4.5%), Luxembourg (5.1%), Germany (5.4%) and the Netherlands (5.6%), and the highest in Spain (26.6%) and Greece (26.0% in September 2012).
Compared with a year ago, the unemployment rate increased in eighteen Member States, fell in seven and remained stable in Denmark and Hungary. The largest decreases were observed in Estonia (12.1% to 9.5% between October 2011 and October 2012), Latvia (15.7% to 14.1% between the third quarters of 2011 and 2012), and Lithuania (13.9% to 12.5%). The highest increases were registered in Greece (18.9% to 26.0% between September 2011 and September 2012), Cyprus (9.5% to 14.0%), Spain (23.0% to 26.6%) and Portugal (14.1% to 16.3%).
Between November 2011 and November 2012, the unemployment rate for males increased from 10.4% to 11.7% in the euro area and from 9.9% to 10.8% in the EU27. The female unemployment rate rose from 10.9% to 11.8% in the euro area and from 10.1% to 10.7% in the EU27.
The chart below highlights the solid trend in the data.
and youth unemployment remains woeful.
As you can see from the report below, Greece, Spain, Italy, Portugal, France and Cyprus are all seeing rising unemployment and as we know these are nations who are most at risk through 2013, although I must admit I’m also quite concerned about The Netherlands.
Overall, although there is some good news buried in it, it’s another very concerning report and shows there is still a very long way to go in the euro crisis.
Full report below:
continually increasing unemployment in the Eurozone “…still presents a significant risk..” is a bit like saying stopping breathing for 10 minutes or so is likely to have significant risk of death.
These U-E figures continue to scare the b-Jebus out of me. The youth EU curves are not stablising – to use the preferred word – I would in fact call it as a continual disaster which is still getting worse.
When Macca sez the Eurozone is getting all better, thanks mainly to the improvements in the area of Banking/Finance, I wonder what he is smoking and can I have some too?
Do we all expect the shell-socked banks to all of a sudden start lending, and in volume, for projects and industries that employ youth in Spain, Portugal, Ireland, Greece, France and others?
shocked, not socked.
How hard is it to implement an edit function? One day of coding from a competent developer – $500 or so.
Someone here kindly linked a BBC series;
http://www.youtube.com/watch?v=s7EwXmxpExw
“The Century of Self”
The parrallels with what happened in the 20′s and early 30′s in Europe are frightening. The inflation is not there- yet. But the build up of massive debt (in this case sovereign), the unemployment and social dislocation similarities are forming. I suspect if UE was measured like for like it would show clearer parrallels.
These European countries (and more to come) are in a very difficult place and that should be recognised exactly for what it is. The culmination of decades of poor Govt and public choices that have allowed public expenditure to consume huge parts of their economies and load public entitlements onto their Treasuries. The resulting tax burden and Debt is choking the life out of their economies.
The seriously concerning aspect of this is that the youth are paying a terrible price for all this.They will not accept that condition forever. The young are not patient.
The political developments in Europe will be worth watching closely , to see if history “rhymes”.
With the islamification of europe over the past decades I can see greater support for parties like Golden Dawn in western europe too. See Partij voor de Vrijheid – PVV who’s leader is Geert Wilders.
I know many of my european friends who if not already would definitely be voting / supporting these new parties.
Being called a ‘DIRTY CHRISTIAN’ in your own country by a young muslim kid is hardly going to make you a pro-immigration supporter (this happened to my friend from Brussels).
Indeed Christiaan. In the 30′s in Europe the Jews bore the brunt of the public frusrations and then much more. This time perhaps the Islamic communities. Who can say. But a pressure cooker is developing.
The point being, the viability of Democracy will be challenged and strongly . Just as it was in the 30′s.
These European countries (and more to come) are in a very difficult place and that should be recognised exactly for what it is. The culmination of decades of poor Govt and public choices that have allowed public expenditure to consume huge parts of their economies and load public entitlements onto their Treasuries. The resulting tax burden and Debt is choking the life out of their economies.
This is completely untrue.
A handful of Euro countries have high sovereign debt because of poorly managed expenses. A couple (Ireland being the poster child) because they assumed _private_ debt. Most were, in fact, reducing debt before the GFC hit in 2007.
It’s not untrue, it just doesn’t fit your statist view.
You are focussing on Debt not expenditure (revenues) doc. I stated clearly “public expenditures” and the “tax burden”. They have been in place decades. Now high Debt and sovereign downgrades are playing their part in the overall negative mix.
Those “handful” are not insignificant – Spain, Portugal, Italy, France.
But, as always ,Govt Debt and spending beyond means is nothing but good of course.
It’s not untrue, it just doesn’t fit your statist view.
“Not an idealogical free market zealot” is not the same thing as “statist”.
You are focussing on Debt not expenditure (revenues) doc. I stated clearly “public expenditures” and the “tax burden”. They have been in place decades. Now high Debt and sovereign downgrades are playing their part in the overall negative mix.
Most Euro countries were reducing debt until the GFC in 2007. You don’t get that when expenditures are greater than revenue.
But, as always ,Govt Debt and spending beyond means is nothing but good of course.
It’s certainly better than gloating about the old and unemployed being thrown out on the street to starve.
“Those “handful” are not insignificant – Spain, Portugal, Italy, France.”
You have no idea what you are talking about. The Spanish government had had a primary SURPLUS (and much-lower-than-average total debt) before the financial meltdown (and consequently the housing bubble burst) hit the country. The government debt shot up AFTER the market collapse, because the government had to fill in the gigantic hole made by the PRIVATE SECTOR implosion.
Spain had been praised by some of the top Eurocrats for its “free-market oriented structure.” In fact, some even urged Germany (yes, that Germany) to copy parts of that model.
Please do at least the minimum amount of research before you type. Do it for Italy and Portugal as well. You would realize that those countries wouldn’t fit your “public sector profligacy” narrative, the kind that is straight out of the likes of J-C Trichet and Wolfgang Schaeuble.
I have been wrong to date about the populations in the PIIGS forcing their governments out and forcing exits from Euro.
How much pain can these people bear? Maybe it happens in 2013.
I understand Spain is supposed to be half way to regaining “competitiveness” with Germany, but how do they attract significant investment to employ people at a time of huge excess capacity? Is it dependent on China becoming uncompetitive and Germany using up its excess capacity. If so it could be another decade.
Youth unemployment of almost 50% is an absolute disaster. I suppose they all move home, which just makes the real estate overbuilding more evident.
Are many of the unemployed in a black economy and doing well?
Although not new, this may be of some interest (RE right-wing extremism):
Amid scars of past conflict Spanish far right grows
http://www.bbc.co.uk/news/world-20773516
It’s a bit of a tragic comedy that in countries that were looted by their business/political elites no one can see more deserving targets for their justified anger than a bunch of non-white foreigners.
Talk about scapegoat, fall guy, whipping boy.
[...] the southern periphery unemployment continues to rise sharply while industrial production and economic output continue to contract which is having a [...]