Home > Eurozone Crisis, financial crisis, unemployment > Meanwhile, in Europe… Unemployment hits a record, differences larger than ever (Nov 2011, graph)

Meanwhile, in Europe… Unemployment hits a record, differences larger than ever (Nov 2011, graph)

from Merijn Knibbe

According to last weeks Eurostat unemployment report the EZ unemployment rate did not change in November, compared with the month before (10,3%). The number of unemployed in the European Union however increased with 55.000 to a new record. According to the press release, ‘Compared with November 2010, unemployment rose by 723 000 in the EU27 and by 587 000 in the euro area’. But averages do not serve us well when we look at either the European Union or the Eurozone, as differences between countries are still increasing (graph). When we look at a somewhat longer period we see employment rates converging up to 2008. After about january 2008, i.e. quite some time before ‘Lehmann’, rates in Ireland and Spain start to explode and differences bertween countries became larger than ever.  In 2009 Greece (which unlike Spain and Ireland did not know a housing bubble) saw its rate explode, at this moment unemployment starts to increase in Italy and Portugal (not shown). I wonder where it will stop – economic policies are clearly aimed at increasing the differences.

Larger version here.

It’s interesting to compare today’s data with some historical German data. It’s not that long ago (2006) that East German unemployment was as high as Greek unemployment today! See here and click on ‘Ost-West-Vergleich seit 1994’. And remember: East Germany is not only the ‘Heimat’, the birthplace, of Angela Merkel, but it has also about twice the inhabitants of Greece, while East German unemployment still is 10% and therewith way too high. No wonder that Germans are not enthousiastic about bailing out yet another high unemployment area. And I can imagine that Angela Merkel has other priorities than Greece… and the Euro. Which probably means that the Euro will not survive.

  1. Cristi C
    January 9, 2012 at 10:41 pm

    What do you mean will not survive? You mean not in the current form with all PIIGS in it. Sure. Greece will be out, Portugal maybe not. Spain might stay. Italy surely in.
    Why do you think it is easier to just abolish € instead of making a law to kick 2-3 states outside Euro? Have you ever consider all the financial and economical contracts established in the last 10 years or so? All will go to settlement courts to establish who to whom owns and what in the old currencies. Any human that declares end of € is insane. A change in its component, sure, it is necessary. But stop saying nonsense about € disappearance.

    • Merijn Knibbe
      January 10, 2012 at 8:21 am

      It’s not what I want – it’s what I see happening. The neo-liberal Euro, with unrestricted flows of capital and ‘to large to fail’ state backed banks, already is disappearing. The Euro (or at least ECB policy) is based upon the idea of an ‘Rational Expectations Eurozone wide monetary area’ which only needs adult supervision from the ECB – and no financial turmoil wil ever happen, again. Slowly, governments and the ECB are realizing that something went wrong and that Minsky was right (in 1972):

      “Theory, which ignores the existence of financial instability, can lead to rules that the authorities should control the growth of the money supply to the well-nigh exclusion of other considerations. Once financial instability is recognized as being at times a significant threat, then such an unconditional posture becomes untenable. Money supply control is at best an conditional desirable policy posture.”

      I can’t resist this one: this theory is at the moment of course Lucas/Sargent style rational expectations economics (which postdates the quote, of course).

      And that’s exactly the situation we’re in, at the moment. This ‘unconditional posture’ is exactly the ECB posture (or at least, until recently). Remember that the growth of the money supply , “+ 4,5% increase a year of M-3”, is ‘THE’ instrument which the ECB uses to try to reach its inflation goal (though their track record was dismal, between 2004 and 2007).

      But the ‘unconditional posture’ has become untenable. As a result, ‘Financial repression’ and a move away from independent (sorry, ‘not-so-independent’) banks and financial institutions as well as ECb policy is on the rise. Some examples: if I’m well informed, the Spanish government does not pay it’s bills anymore, or at least not in time, which means that it’s not borrowing from the ‘market’ but from it’s citizens. The Belgian government very succesfully sold a kind of bonds directly to it’s own citizens, passing ‘the market’ by – as far as I’m aware of this succes might really have lowered interest rates in Belgium. Pressure on pension funds to invest in domestic bonds is increasing (Ireland!). Government owned chartered banks (and since 2008 we’ve got quite a few of them!) can freely borrow from the ECB at a 1% rate or so – and (with a nice profit) lend it to the government who owns it. You think that won’t happen? And Merkel backs Germany, not the euro. Can’t blame her for that – but it won’t help the euro (and it is wrecking an increasing number of economies).

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