Eurozone unemployment rate hits 10-year peak

BRUSSELS — Unemployment hit a 10-year peak in the eurozone in May, dimming any prospect of a quick recovery from recession. In Sweden, the central bank pulled out the stops to revive its economy with a surprise cut in rates to a fresh record low and more loans to banks to foster lending.

The jobless rate in the 16-nation eurozone rose to 9.5 per cent in May from April’s 9.3 per cent, the highest rate since 1999, European Union data showed. “May’s sharp increase in eurozone unemployment demonstrates that the ‘green shoots of recovery’ are not yet showing up in the labour market,” economist Martin van Vliet of ING said.

“With the economy still in recession and any near-term recovery likely to be muted, unemployment looks set to continue to rise this year and next”. Statistics office Eurostat calculated that 3.4 million people in the currency zone lost their jobs in the year from May 2008, with 5.1 million joining jobless queues across the 27-nation EU.

Rising unemployment is emerging as the biggest challenge to recovery, which governments around the world are trying to stoke with record low interest rates and by pumping trillions of dollars into their economies. In Sweden, the central bank cut rates to 0.25 per cent from 0.50 per cent in a surprise move, putting official rates at their lowest since records began in 1907.

It also offered 100 billion crowns ($13.2 billion) of loans to banks to foster lending as it sought to reverse its worst recession since the 1940s.
In Britain, data showed a decline in activity in the construction sector accelerated in June and UK lenders said they did not expect much of a pick-up in demand in the third quarter even though they would make more credit available.

The Bank of England’s David Miles warned parliament that while the next few quarters could see a rebound, a return to rapid growth was unlikely. In Japan, Economics Minister Yoshimasa Hayashi said he will do his utmost to prevent price falls from persisting in the economy, which is facing its second bout of deflation this decade.

In a sharp contrast to weakness in industrialised nations, India’s finance ministry said the Asian giant could see growth of around 7 per cent this year and more in coming years if it makes sweeping reforms. “India should be back on the new trend growth path of 8.5 to 9 per cent per annum provided the critical policy and institutional bottlenecks are removed,” the report said.

In China, the government raised the stakes in its long-haul drive to unseat the dollar as the world’s dominant currency, seeking a debate on an alternative reserve regime at next week’s Group of Eight summit. G8 sources said that Beijing has asked to debate its proposals at the summit in Italy and the issue could be mentioned in the summit statement. China’s deputy foreign minister said he was unaware of such a request, but that it would be “normal” for the issue to be raised during the meeting. — Reuters