Business World

Wednesday 21 February 2018

Unemployment down for first time in 3 years across eurozone

Benoit Coeure, chief executive officer Agence France Tresorv
Benoit Coeure, chief executive officer Agence France Tresorv

John O'Donnell and Robin Emmott

A pick-up in inflation this month eases pressure on the European Central Bank (ECB) to act next week, and the first fall in unemployment in almost three years shows a tentative eurozone recovery is gaining traction.

The double dose of data lent credence to the ECB view that the 17-country bloc is undergoing a gradual economic recovery more than five years after a financial crisis erupted, forcing five countries to seek emergency aid from their neighbours.

Consumer price inflation – the rate of increases in the cost of shopping and paying household bills – rose in the eurozone by 0.9pc in November, slightly more than economists had predicted.

That put the annual inflation rate, measured on a basket of goods, including cigarettes, beer and gas bills, on an upward path after an unexpected slip in October. While energy prices fell, the rising cost of food drove up the overall index.

The European Union's statistics office Eurostat also said yesterday that the eurozone jobless rate fell in October to 12.1pc from the previous month's 12.2pc, the first fall since February 2011.

"For the ECB, both indicators provide welcome news as they are preparing for next week's meeting," said Berenberg bank economist Christian Schulz.

The ECB, which holds a policy meeting next Thursday, cut interest rates earlier this month to a record low of 0.25pc after inflation tumbled to 0.7pc in October – far below its target of just under 2pc.

Some ECB policymakers have since floated the idea of taking additional, less orthodox policy action to support the economy – such as asset purchases, or quantitative easing (QE).

But Benoit Coeure, pictured right, a member of the six-man executive board that forms the nucleus of the ECB's policymaking Governing Council, played down any immediate prospect of the bank embarking on a large-scale QE programme.

"Outright asset purchases is one of the tools that the ECB can use to implement its monetary policy, so it is in principle possible," Mr Coeure told Japanese business newspaper 'Nikkei' when asked about his views on QE.

"But if the question is, should the ECB resort to large-scale asset purchases the way the Fed or Bank of Japan have done it, then I don't think this is warranted given the current prospects for inflation," he added.

The ECB did not see a deflation threat for now, he added.

The fall in unemployment was better than economists had forecast and the news follows an encouraging recovery in optimism, despite shrinking loans to consumers and businesses in the bloc.


Economic sentiment in the 17 countries using the euro strengthened by 0.8 points to 98.5 in the seventh straight month of gains, according to a European Commission survey on Thursday, beating economists' expectations.

The business climate reading turned positive for the first time since March last year.

But wide divergences remain in the economic health of eurozone members. Greece, Cyprus and Ireland suffered deflation in October, while French business confidence fell in November.

Similar divisions exist in employment.

While just 5pc of Austrians are unemployed, 27pc of Greeks and Spaniards are without a job. In total, 19 million people are out of work.

"The euro area is early on in the climb out of the crisis. The summit is still far and covered in fog," ECB Executive Board member Yves Mersch said.

Irish Independent

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