EUROPE REMAINS A JOBLESS SWAMP, DESPITE SPANISH MIRACLE / THE TELEGRAPH

Europe remains a jobless swamp, despite the Spanish miracle

By Ambrose Evans-Pritchard

Last updated: June 3rd, 2014

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Picture: Alamy

Congratulations to Spain.


King Phillip VI will take over a country that created 198,000 jobs in April, the best single month since the glory days of the property boom in 2005.

There is a very long way to go. The jobless rate is still 25.1pc, rising to 53.5pc for youth. Yet if this jobs miracle continues for a few more months it will be one of the great turnaround stories of modern times.

(I am assuming that the data is true, a necessary caveat given the stream of articles recently in Le Confidencial accusing the government of cooking figures).

Unfortunately, the apparent recovery in jobs in the rest of southern Europe and Holland is largely a mirage, while in Finland it is getting steadily worse.

Pan-EMU unemployment fell to 11.7pc in April but that is largely because workers are still dropping out of the workforce or fleeing as EMU refugees to reflationary economies.

Italy lost 68,000 jobs in April, according to the country’s data agency ISTAT. The total employed fell to 22,295,000.

Italian employment figures

Italian unemployment rose to 13.6pc. For youth it has climbed to a modern-era high of 43.3pc, implying very serious damage to Italy’s long-term economic dynamism due to labour hysteresis.

The employment rate dropped to 55.2pc. Ageing workers are giving up the search for jobs – chiefly in the Mezzogiorno – and returning to their patches of land in impoverished early retirement.

Yet all this was recorded as stabilisation in the Italian part of the Eurostat’s release today. You might conclude that the country was starting to claw its way out the crisis. In fact it remains trapped in a hopeless situation inside EMU, with an exchange rate overvalued by 20pc to 30pc against Germany.

France saw a rise in its key jobless gauge by 14,800 in April. INSEE says the number who want to work but are not included in the jobless figures has jumped to 1.3m.

This is known as the “unemployment halo”. As you can see from this chart (the most recent available, unfortunately) it has been soaring.





Yes, Italy and France are the laggards these days. But there is no EMU-wide recovery in jobs. The currency bloc is still stuck in a depression, still wasting away in a lost decade of debt-deflation, starved of investment as the rest of the world moves on.

It has yet to generate internal demand. The EMU project is almost entirely reliant on the rest of the world to pull it out of the swamp.

Stripped bare, the strategy of the EMU elites is to bet/hope that the global economy is entering a fresh cycle of global expansion, and that nothing more is needed. The question is what will happen if we are instead nearing the end of a five-year growth cycle, with stock markets already looking frothy and overstretched. What if this is as good as it gets?

Medium-sized trading countries can get away with such a craven policy. It is another matter for large economic blocs that trade mostly within themselves. Europe’s leaders still seem to think like pre-EMU minnows. Since they have created a continental super-currency, they would be well-advised to start behaving as continental economic players.