Eurozone Unemployment Hits 15-Year High (and About to Get Much Worse); "Official Denial" In Spain

Reuters reports Eurozone Unemployment Reaches Near 15-Year High

Unemployment in the euro zone reached its highest level in almost 15 years in February, with more than 17 million people out of work, and economists said they expected job office queues to grow even longer later this year.

Joblessness in the 17-nation currency zone rose to 10.8 percent - in line with a Reuters poll of economists - and 0.1 points worse than in January, Eurostat said on Monday.

February's unemployment level - last hit in June 1997 - marked the 10th straight monthly rise and contrasts sharply with the United States where the economy has been adding jobs since late last year.

"We expect it to go higher, to reach 11 percent by the end of the year," said Raphael Brun-Aguerre, an economist at JP Morgan in London. "You have public sector job cuts, income going down, weak consumption. The economic growth outlook is negative and is going to worsen unemployment."

"With inflation remaining stubbornly high throughout the euro zone, there is very little hope of a consumer recovery," said Jennifer McKeown, an economist at Capital Markets.

"Official Denial" In Spain

I am amused by the official denial by the Spanish Finance Minister last week. Please consider Spain reveals deep cuts to meet deficit goal

Spain announced deep cuts to its central government budget on Friday as it battles to convince European partners and debt markets it can rein in its budget deficit in the face of growing complaints from the public.

The government said it would make savings of 27 billion euros ($36 billion) for the rest of 2012 from the central government budget, equivalent to around 2.5 percent of gross domestic product. The figure includes tax rises and spending cuts of around 15 billion euros announced in December.

The cuts come despite popular resistance - a general strike on Thursday disrupted transport, halted industry and saw some minor violence - and against a grim economic backdrop; Spain is thought to have fallen back into recession in the first quarter and has the highest unemployment rate in the European Union.

Speaking in Copenhagen after an EU ministerial meeting, Spanish Economy Minister Luis de Guindos said the measures would be implemented as soon as possible, adding that any suggestions that Madrid needed emergency international funds was "absurd".

Ding, ding, ding, the official denial bells are sounding loudly.

For more on the official denial theory, please see Eurozone Breakup Logistics (Never Believe Anything Until It's Officially Denied)

Here is a far more realistic comment from IHS Global Insight economist Raj Badiani.

"I suspect that the government could be forced to implement further austerity measures later this year, with lingering economic downturn set to place additional strains on an already perilous budget deficit reduction plan. The main risk is that the government's tax revenue projections for 2012 look too optimistic."

That Spain will come up short on its budget targets and GDP estimates is not a risk; it's a certainty.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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