Wednesday, 3 April 2013

EUROPE:''Unemployment'': The Future of Euro Currency

Unemployment in the euro zone hit 12 percent in February, its highest level since the creation of the euro, according to data released on Tuesday. It provided further evidence that the debt crisis has driven a wedge between the stable north and the struggling south in the 17-member currency bloc.

Euro-zone unemployment data released on Tuesday provided yet further evidence of the widening economic rift between the stable north and the struggling south. But it also shed light about the future of euro currency.

The rate was 12 percent in February, unchanged from an upwardly-revised 12 percent in January, initially reported as 11.9 percent, said Eurostat, the statistical office of the European Union. It was the highest rate since the creation of the euro in 1999.

In the 17-nation bloc, 19.07 million were registered as unemployed, Eurostat estimated. In the full 27-member European Union, the unemployment rate rose to 10.9 percent from 10.8 percent.

The difference between the northern and southern euro member states is striking. Austria, Germany and Luxembourg had jobless rates of 4.8 percent, 5.4 percent and 5.5 percent respectively, while Greece and Spain were the hardest hit with rates of over 26 percent each. Portugal's unemployment stood at 17.5 percent.

The debt crisis is hitting young people particularly hard. In Greece, more than one in two people aged under 25 is without work -- a staggering rate of 58.4 percent. In Spain, the rate is 55.7 percent, followed by Portugal with 38.2 percent and Italy at 37.8 percent.

Economic powerhouse Germany has the lowest youth unemployment at 7.7 percent. The average rate for the euro zone was 23.9 percent in Feburary, down slightly from January.

The figures are likely to reinforce criticism by many politicians and economists that the austerity approach to tackling the debt crisis isn't working. The bailout of Cyprus agreed to last week is expected to plunge yet another euro-zone member into a deep recession. Economists say the Cypriot economy could shrink 10 percent this year, with thousands of job losses, as a result of the deposit levy and enforced scaling down of the island's banking sector, one of its main industries.

The debt crisis isn't just increasing the strain within the euro zone, but also threatens to set the bloc back in competition with the other big economic regions. China's GDP is growing at around 8 percent a year. The US economy grew 2.2 percent in 2012 and should expand 1.7 percent in 2013, the International Monetary Fund predicts. The euro zone, meanwhile, contracted by 0.6 percent in 2012 and is expected to shrink again, by 0.3 percent, this year.
 
Further more, the debt crisis has certainly diminished the euro's attraction as a reserve currency.
 
That is the message to be gleaned from the latest installment of the regular International Monetary Fund report on currency reserves held by countries around the world. According to the report, developing economies shed some $45 billion worth of euros in 2012 and have sold close to $90 billion worth of euros since the second quarter of 2011.
 
The IMF report indicates that the recent downturn in euro holdings marks a break following more than a decade of growth among developing nations. They now hold just a quarter of their foreign currency reserves in euros, a drop from 31 percent in 2009 and the lowest level in a decade.
 
The numbers seem to indicate that the ongoing euro crisis, fueled by high sovereign debt loads in several countries belonging to the common currency union, has eroded global confidence in the euro.
 
The euro-bloc economic stagnation and unemployment threaten the future of euro-currency.
 
By Guylain Gustave Moke
Political Analyst/Writer
Investigative Journalist
 
Photo Credit: Getty Images