Unemployment in the 17-country euro currency bloc hit another record in May as the crippling financial crisis pushed the continent toward the brink of recession, official figures showed today.

Eurostat, the EU's statistics office, said unemployment rose to 11.1 per cent in May from 11 per cent the previous month. May's rate was the highest since the euro was launched in 1999 and adds further urgency to the eurozone countries' plan to create economic growth and cut excessive government debt.

At a summit last Friday, eurozone leaders agreed a set of short- and long-term measures to shore up the euro and unveiled a limited economic growth package. Markets have responded positively with a stock market rally which, if sustained, should help buoy economic confidence in the eurozone — a key step to easing the crisis.

But the unemployment data highlighted the extent of the challenge facing European leaders.

May's unemployment rate compares badly with an unemployment rate of 8.2 per cent in the United States and 4.4 per cent in Japan, and is expected to rise further in the coming months as the eurozone economy is forecast to slide back into recession this year.

In total, 17.6 million people were out of work in the eurozone in May, up 88,000 on the month before and 1.8 million more than the level a year earlier.

"The numbers ... indicate ongoing labour market weakness, with further deterioration highly likely in the second half of the year," said Ashley James, senior European economist at RBC Capital Markets.

Debt crisis concerns drive up jobless rate

Unemployment has been edging higher for over a year as concerns over the debt crisis and the future of the euro currency have weighed on economic activity. Businesses have been cutting jobs or delaying hiring as confidence in the economy waned, while many governments have pursued austerity programs, including big job reductions in the public sector.

There are huge disparities across the eurozone, however.

The labour markets of those countries at the front line of the debt crisis, such as Greece and Spain, are suffering most due to their governments' stringent austerity measures and deep recessions. The highest unemployment rate across the eurozone was recorded in Spain, where 24.6 per cent of people were out of work in May. Even more dramatically, 52.1 per cent of the country's youth were unemployed. Greece's youth unemployment rate also stands at 52.1 per cent at last count in March.

"EU policymakers and stakeholders are aware of this potential catastrophe of creating a lost generation, but so far appear powerless to halt the rising jobless figures among young people," said Andrea Broughton, principal research fellow at the Institute for Employment Studies in London.

"This is a huge problem to tackle, but it is essential that young people are encouraged to develop skills that are in demand and that they are given the chance to obtain meaningful work experience that enables them to gain a foothold in the labour market," Broughton added.

Other countries in the eurozone, particularly those in the north, are faring better. Germany's unemployment rate stood at only 5.6 per cent. And its youth unemployment rate stood at only 7.9 per cent, markedly lower than the more than one in two unemployed in both Greece and Spain.

However, a raft of economic indicators in recent weeks have shown that Europe's biggest economy is not immune to the problems in the rest of the region. Germany's exports to other countries in the eurozone are under pressure and business confidence is waning.

Across the wider 27-country European Union, which includes non-euro countries such as Britain and Poland, unemployment edged up to 10.3 per cent in May from 10.2 per cent the month before.