Unemployment across the 17 countries that use the euro remained at its record high rate of 11.4 per cent in August, official data showed Monday, renewing concerns that efforts to slash debts have sacrificed jobs.
While European leaders have managed to calm financial markets in recent months with promises to cut spending and build a tighter union, they have been unable to solve the eurozone's deep-rooted economic problems and the rising tide of joblessness.
In August, 34,000 more people lost their jobs in the eurozone, according to data released Monday by the European statistics agency, Eurostat. The unemployment rate — the highest since the euro was created in 1999 — is the same as July's, which was revised up from 11.3 Monday.
Europe's problems are dragging down the entire global economy. The region is the U.S.'s largest export customer and any fall-off in demand will hit American companies — as well as President Barack Obama's election prospects.
The 17-country eurozone is in danger of slipping into recession this year after its economic output dropped 0.2 per cent in the second quarter. Six countries — Greece, Spain, Italy, Cyprus, Malta and Portugal — in the eurozone are already in recession.
Howard Archer, the chief economist for HIS Global Insight, said it will take some time before Europe's labour market rebounds.
"It is unrealistic to expect any turnaround in the near term at least in eurozone labour markets given ongoing weakened economic activity and low business confidence," he said. "Indeed, there looks to be a very real danger that the eurozone unemployment rate could reach 12 per cent in 2013."
While austerity measures were introduced to ease the financial crisis by lowering public debt, they are also slowing down economies as government spending drops off. This is also pushing unemployment higher and threatening the continent with recession. Some experts urge leaders to instead loosen spending to encourage growth.
Creditors push for more cuts
But many European countries have very little room in their budgets for such a stimulus. Greece, for instance, is already relying on a European bailout to pay its bills — and its rescue creditors are pushing for more cuts, not fewer.
Spain, meanwhile, has just unveiled a €40 billion ($51 billion Cdn) program of spending cuts and reforms designed to convince international lenders and investors that it can keep a control of its deficit.
Greece and Spain have the highest unemployment rates in the eurozone, around 25 per cent for both.
Other countries are also pushing through reforms that are designed to free up the labour market by breaking down restrictive practices and making it easier for companies to hire and fire workers. However, with no end in sight to austerity or high unemployment, there are doubts that governments will be able to stay the course in the face of widespread popular protests.
Tens of thousands of people poured into the streets of Madrid, Lisbon and Paris this weekend to protest austerity. In Spain and Greece last week, demonstrations descended into violence as protesters clashed with riot police.
"It's clearly unacceptable that 25 million Europeans are now out of work," said Jonathan Todd, an EU spokesman for employment. "The figures ... demonstrate the importance of putting into place effective reforms."
European countries outside the eurozone are faring slightly better than those inside. For all 27 countries in the EU, the unemployment rate for August held steady at 10.5 per cent after the July rate was also revised up slightly.