Eurozone unemployment figures hit a new high

Greece-protest

 

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LONDON — Europe’s economic gloom deepened Wednesday on the back of news that unemployment in the 17-nation Eurozone hit another record high in September as the region’s debt crisis continued to sap the confidence of business owners, investors and consumers alike.

About 18.5 million people were out of work in the Eurozone in September, adding up to a jobless rate of 11.6%. That figure exceeds August’s record of 11.5% and follows the worrisome trend of the past half-year, during which unemployment has either remained static or worsened with each successive month.

The grim picture painted by Eurostat, the European Union’s statistical agency, comes as the continent’s debt crisis sits on the cusp of entering its fourth year with no full resolution in sight. Lawmakers in Greece, where the crisis began, are still grappling with another punishing round of austerity cuts demanded by international lenders, while Spain is keeping markets on tenterhooks over whether it will become the latest country to seek a bailout from its European partners.

According to Eurostat, there were 2.2 million more people out of work in September than a year ago in the 17 nations that share the euro currency. Since then, a number of those economies have tumbled back into recession, government debt ratios have risen, commercial lending has dwindled and investors have taken flight.

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Deepening recession heats up talk of Greece exiting Eurozone

European Central Bank President Mario Draghi

When the euro hit wallets and bank accounts on New Year’s Day a decade ago, champagne and fireworks greeted the Europeans' embarking on what was touted as an irrevocable course for prosperity and economic integration.

GlobalFocusOver the years, though, as the economies of Greece, Spain and other Eurozone nations became mired in debt, expectations of a happy commune of affluence have given way to thoughts of breaking off the laggards to save the herd. What the Economist and other journals have referred to as a kind of "Hotel California that you can never leave" now looks to some to be exactly the hellish trap evoked by the Eagles in their 1970s ballad.

Greek officials disclosed this week that their economy shrunk 6.2% from April through June and that unemployment is close to 24% and rising. The shaky coalition government, confronted by strikes and protests against earlier austerity measures, has yet to identify the last $5 billion or so in budget cuts it must make to qualify for the next tranche of bailout funds due in September.

The bad news came as little surprise to the Eurozone’s better-off members, Germany first among them, which have complained for months that Athens has repeatedly failed to demonstrate the will to pare its bloated government payroll and get serious about collecting taxes.

A delegation of the so-called troika of creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- visited Athens last month and is expected to issue a critical report on the Greek balance sheet in September. That has shifted the conversation from whether Greece will exit the Eurozone to how many other common currency users might follow.

Even Greek analysts have become dubious of the country’s prospects for living up to the commitments made to get triple-digit billions in bailout funds. They have been issuing gloomy forecasts of an inevitable Greek exit -- or Grexit, as it has come to be called -- perhaps preparing the public for an eventual return to the drachma.

“The political system once more showed how counterproductive it is. Instead of designing a workable state, it tries to reproduce the one that already exists,” the Greek daily Kathimerini’s columnist Paschos Mandravelis groused Monday. In his analysis, titled “On another planet,” he accused the government of protecting well-connected allies and unproductive state jobs.

A week ago, Greek Finance Minister Yannis Stournaras said the government was still looking for about a third of the $15 billion in cuts to the 2013-14 budgets demanded by the troika in exchange for vital cash infusions. Debt inspectors are due back next month for a final review of whether Athens has gotten its finances in order, a judgment expected to be negative unless the government forces through deeply unpopular budget cuts and privatization plans in the final few weeks.

Elsewhere in the common currency club, the mood has changed from one of steadfast commitment to keeping the 17-nation Eurozone intact to mounting resignation that at least Greece will have to go.

Athens’ potential departure "has long since lost its horrors," German Economy Minister Philipp Roesler told ARD television recently. Luxembourg Prime Minister Jean-Claude Juncker, who chairs Eurozone finance ministers’ meetings, observed last week that a Greek exit would be “manageable.” On Monday, when German Chancellor Angela Merkel returned from a hiking vacation in the Italian Alps, she was confronted with even more dismissive comments by her coalition partners.

“An example must be made of Athens that the Eurozone can also show teeth,” Markus Soeder, Bavarian finance minister and member of a conservative sister party to Merkel’s Christian Democratic Union, told the Bild am Sonntag newspaper. He contended that Germany can ill afford to keep bailing out spendthrift euro members and that “further help to Greece is like pouring water into the desert.”

In the Economist cover story this week, a mock memo to Merkel on a possible Plan B advises her to consider two options to her current course of scrambling to hold the Eurozone together. One envisions Greece's departure, which alone could cost the euro area $398 billion in debt write-offs and transitional aid. The other scenario, in which Portugal, Ireland, Cyprus and Spain would also leave, could cost the rump Eurozone $1.4 trillion but halt the slow bleeding of bailouts to the struggling periphery, the respected London-based publication calculated.

Charles A. Kupchan, a professor of international affairs at Georgetown University and former European affairs director on the National Security Council under President Clinton, attributes the growing Grexit talk to an emerging consensus among economists that Athens' departure is a question of when, not if.

"Behind the scenes the European Union is making preparations for a Greek exit to contain the damage," he said of the latest assessments of the Eurozone's integrity.

Grexit would be manageable because of Greece's small economy and the fact that its finances are unlikely to ever meet Eurozone standards, Kupchan said. But he sees other departures as potentially destabilizing for the whole monetary union experiment.

"When you start talking about the Spanish or the Portuguese or the Irish leaving, that's a new ballgame," he said. "That's not a controlled exit of a member or two; it's a complete overhaul of the Eurozone."

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Photo: Mario Draghi, president of the European Central Bank, has pledged to do whatever it takes to protect the euro common currency. But mounting debts and persistent recession in some of the peripheral countries of the Eurozone have turned the conversation to managing the departure of Greece, instead of preventing it. Credit:  Hannelore Foerster / Bloomberg


Eurozone crisis: A love-hate relationship imperils the currency

Alexis Tsipras, leader of the Coalition of the Radical Left, Syriza, presents his party's economic program in Athens on Friday, ahead of Greece's general elections on 17 June.
The Irish voted "with a heavy heart" this week to tough out the hardships of remaining a member of the Eurozone. Greek and French voters protested the pain of austerity last month by throwing out leaders who had been slashing jobs and services to reduce debt. Spain and Italy may be more committed to the belt-tightening required to shore up the euro, but skeptical investors could undermine those sacrifices by waging a run on their banks.

GlobalFocusEuropeans have been lurching from one crisis to another for the last four years as recession wreaked havoc with many of the 17 Eurozone economies that have too little in common beyond the coins and banknotes they use. Some of the world's most influential economists now worry that crisis could escalate to catastrophe if Greeks heed the siren song of a fiery leftist telling them they can keep their euros but renege on austerity measures they promised in exchange for bailout funds.

A German-led effort to get the bloc's financial houses in order has exposed flaws in the common currency's management and ambivalence among euro users about the continent's ambitious goals for economic integration. What is accepted by frugal, savings-minded Northern Europeans as laudable restraint in public spending has sown resentment in Eurozone countries ravaged by high unemployment, teetering banks and withering cuts in social services.

Ireland's vote to approve the fiscal treaty signed this year by 25 of the European Union's 27 member states was a convincing 60.3% in favor. But politicians on both sides of the issue acknowledged that it was a hard pill to swallow for a country struggling to meet its obligations after being bailed out by Eurozone colleagues in 2010.

Ireland had one of the highest deficits in the Eurozone three years ago, but it has cut spending and debt enough to see prospects for emerging from a four-year recession. Small signs of economic improvement -- a marginal drop in unemployment last month and a hint of growth over the last year -- were enough to push the Irish to commit to the Eurozone's collective debt-reduction goals by endorsing the treaty.

"The astonishing thing about this campaign was that lots of people voted 'yes' with a heavy heart, and many voted 'no' with a heavy heart," said Joan Burton, Ireland's social protection minister, citing concerns in both camps about the treaty's potential constraints on spending to create jobs.

The long-term good may not be so prominent in the minds of Greek voters when they go to the polls June 17 to choose among candidates making brash and contradictory promises about Greece's future in the Eurozone. Alexis Tsipras has moved his radical left Syriza party to the political fore, according to the latest poll, with his vow to bail on the bailout terms and his dubious assertion that Greece would nevertheless retain use of the euro.

“The first act of a government of the left, as soon as the new Parliament is sworn in, will be a cancellation of the bailout and its implementation laws,” Tsipras told boisterous supporters Friday when he outlined the party's economic platform.

All recent polls in Greece have shown Syriza and the conservative New Democracy Party running a close battle for popular support, but neither likely to get enough votes to form a government on its own. That threatens a repeat of the fractured May 6 vote and futile attempts among the irreconcilable parties to form a coalition government. The latest survey -- and the last before a two-week moratorium on polling ahead of the election -- on Friday showed Syriza almost doubling its share of the vote captured last month, with 31.5% support compared with 25.5% for New Democracy, which finished first on May 6.

In a sign of the disarray afflicting Greece, the country didn't manage to update its unemployment statistics for the last three months for an EU report released Friday showing a euro era-high 11% joblessness across the currency union. In February, the last month for which Athens has released figures, 21.7% of Greeks were out of work.

More job cuts and tax hikes were due to be imposed this month ahead of the next payment of bailout money from Brussels. Those cuts have been essentially suspended in the absence of an elected government.

As Eurozone residents hold their breath awaiting the next Greek vote, more immediate worry has settled on Spain, where national leaders are urging fellow Europeans to help rescue Spanish banks saddled with defaulted loans issued during a building boom in the years before recession hit in 2008. Spain last week promised troubled lender Bankia nearly $24 billion to keep it afloat, but borrowing rates have soared to record highs -- nearing the 7% rate that pushed Ireland, Portugal and Greece over the edge and forced them to seek bailouts.

Spain, the fourth-largest economy in the Eurozone, may be too big to bail out, economists say, spreading fears for the future of the entire common-currency project.

The EU commissioner for monetary and economic matters, Olli Rehn, warned during a speech in Helsinki, Finland, on Friday that "the way things are going and under the current structures, the euro area has a significant risk of breaking up."

Eurozone states have "extremely tough decisions ahead, and it’s important to face the truth,” Rehn said, alluding to suggestions among other financial leaders that contingency plans should be drawn up to cope with the worst-case scenarios being threatened from several euro states.

Earlier this week, the European Commission called for creating a "banking union" that would allow the bloc's financial institutions to invest directly in troubled national banks, rather than force already indebted states to take on further obligations at unsustainable interest rates. But Germany has resisted the idea of pooling its sterling credit with other euro users, and Chancellor Angela Merkel also remains steadfast against loosening the spending shackles on struggling states to allow them to invest in growth.

The standoff amid possibly impending catastrophe has alarmed financial experts around the globe.

"The Eurozone is experiencing three crises at the same time -- a fiscal crisis, a banking crisis and a growth crisis," said former U.S. Treasury Secretary Robert E. Rubin, now at the Council on Foreign Relations, citing weak political leadership in Europe and deep concern for the situation in Spain. "If the Eurozone continues to unravel, not only will that have very serious consequences for the Eurozone, but I believe it will have serious and maybe even severe consequences for the entire global economy, including the United States."

In a commentary Friday in Britain's Financial Times, World Bank President Robert Zoellick drew disturbing parallels between what is happening now in Europe and the financial crises that were the bellwethers of the 2008 collapse on Wall Street.

"Events in Greece could trigger financial fright in Spain, Italy, and across the Eurozone," Zoellick wrote, saying that the summer ahead had "an eerie echo of 2008."

Eurozone leaders need to be ready to recapitalize banks if spooked investors rush to withdraw their euro-denominated assets, he said.

"There will not be time for meetings of finance ministers to discuss the outlook and debate the politics of incrementalism," Zoellick said. "In panicked markets, investors flee to safe assets, sparking other flames."

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Photo:  Alexis Tsipras, leader of Greece's radical left Syriza, presents the party's economic program in Athens on Friday. Tsipras vowed to cancel harsh austerity measures demanded by the Eurozone leaders in return for bailouts of Greece's heavily indebted economy. Credit: Simela Pantzartzi / European Pressphoto Agency.


Eurozone unemployment rate remains at record high [Map]

Unemployment in the 17 countries that use the euro remained at 11% last month, the highest it has been since the currency was introduced, according to new data released by the European Union.

More than 17.4 million people in the region were out of work last month, a troubling increase as the Eurozone grapples with how to muscle out of its debt crisis.The newly released figures testify to the continued pain across Europe as it struggles with competing demands to rein in spending and nurture growth. 

That pain is far worse in some countries than others: Spain suffered a 24% joblessness rate, the worst in the European Union. A banking crisis there has sunk stock prices and alarmed investors fearful of a run on Spanish banks. Borrowing rates have soared to precarious heights.

Greece was close behind with nearly 22% unemployment, while Latvia and Portugal tied around 15%. (Greek figures date to February.) The lowest rates were in Austria, Germany, Luxembourg and the Netherlands, where unemployment rates ranged from roughly 4% to more than 5%.

Despite the grim numbers, there were some hopeful signs for the European Union. Though the unemployment rate grew in 15 EU nations, it fell at least marginally in 12 others, including Ireland, where voters signed off on a European treaty to limit government spending despite opponents' frustration with austerity cuts.

This map spotlights the EU nations suffering the highest unemployment rates, shaded in orange, and those with the lowest, tinted in blue:

Eurozonemap

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Ireland votes on treaty aimed at controlling Europe's deficits

Irish voters went to the polls in a referendum on a treaty aimed at controlling the runaway deficits of European Union countries
LONDON -- Irish voters went to the polls Thursday in a referendum on a treaty aimed at controlling the runaway deficits of European Union countries.

The voting is being watched throughout Europe. Ireland is the only country to put to the EU plan, instigated by Germany early this year, to a public vote. Irish constitutional law requires public approval on major reforms.

The treaty calls on member states to limit spending and stick to budgetary targets. It aims to coordinate EU fiscal and budget policies and hold annual structural deficits within 0.5% of gross domestic product, with bailout funds from the European Stability Mechanism available to those who ratify.

Fines are to be imposed on those who fail to comply with debt targets.

Of the 27 EU nations, Britain and the Czech Republic have opted out of the treaty, which must be ratified by 12 of the 17 Eurozone states by next March. So far, Romania, Slovenia, Portugal and Greece have approved it. 

Polls indicate that the treaty will pass, but Ireland has a quixotic record on EU treaties.  Two previous referendums -- on EU enlargement in 2001 and a more streamlined EU administration in 2008 -- were rejected by Irish voters, then accepted in a second vote after amendments. This time there will be no second vote for Ireland.

But Irish voters are expected to reluctantly favor more austerity and continued access to EU rescue funding. Ireland has already been saved by a massive European bailout of $108 billion in 2010.

Although one poll shows the treaty passing with 60% support, there is also the specter of low turnout. 

In a last appeal before the balloting, Prime Minister Enda Kenny urged Ireland's 3.1 million voters to "vote yes on Thursday, yes to stability, yes to investment," and give greater credibility to Ireland when it takes over the EU presidency in January.

Fierce criticism of the measure has come from the Sinn Fein opposition party, once the political arm of the outlawed IRA revolutionaries of Northern Ireland but now a legitimate and popular left-wing force in Northern Ireland and the Irish republic. Party leader Gerry Adams told voters not to give up their say over Irish economic policy and "not to write austerity into the Constitution."

Results of the vote are expected to be known by Friday.

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Photo: Posters for and against the EU fiscal treaty are seen outside government buildings in Dublin, Ireland. Credit: Peter Morrison / Associated Press


Germany signals willingness to boost Europe's bailout fund

German Chancellor Angela Merkel signaled a new willingness Monday to boost the size of Europe's bailout fund for financially troubled nations
REPORTING FROM BERLIN -- Bowing to international pressure, German Chancellor Angela Merkel signaled Monday
that her country could agree to a boost in Europe's bailout resources for financially ailing nations, a move she and other German leaders had resisted in their attempts to beat back the euro debt crisis.

Merkel told a gathering of her fellow Christian Democrats that it might be possible for Europe's temporary rescue fund to run in tandem with its permanent successor. The arrangement would see the 200 billion euros (about $265 billion) already earmarked for bailouts of Greece, Ireland and Portugal operating alongside the 500 billion euros (about $665 billion) committed to the permanent rescue fund, known as the European Stability Mechanism, or ESM. The ESM is scheduled to come online this summer.

"We could see the 200 billion euros running parallel to the ESM's 500 billion euros until they've been paid back by the bailed-out countries," Merkel said Monday.

But after that, Merkel insisted, the permanent bailout fund would remain set at 500 billion euros and shouldn't be enlarged beyond its current size.

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What crisis? Partying Portuguese pirates do Carnaval anyway

Carnaval revelers in Ovar, Portugal.
Portuguese officials tried to stop Carnaval revelers from taking the day off Tuesday, saying it was a time to sacrifice. But as these partying pirates show, many Portuguese partook in festivities anyway.

Every day on WorldNow we highlight a remarkable shot from around the world. Today our photo comes from Ovar, Portugal, where men dressed as pirates make a toast during the Carnaval parade.

Like much of Europe, Portugal has been under pressure to cut costs, undergoing austere measures to keep itself financially afloat. The country got a $103-billion international bailout last year, saving it from bankruptcy.

Prime Minister Pedro Passos Coehlo had urged the Portuguese to stay at work during the festival.

"This isn't a normal year, it's an important year of national emergency,” Passos Coelho said when he refused to grant the usual day off for Carnaval, the Associated Press reported.

But the Portuguese still poured into the streets for the colorful parades that mark the festival. Portuguese media estimated more than half of workers in the capital of Lisbon stayed home.

Hungry for more from Carnaval? The Times recently explored what the festival is like in northeast Brazil and how it differs from the wild celebrations that Rio de Janeiro is known for:

"Samba? No, that's the least traditional thing to have in our Carnaval," said Jorge Diogo Souza Costa, a 24-year-old student from Recife. "All that elaborate spectacle, with women exposing themselves, that's for the cameras in Rio. We don't do that stuff around here."

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Photo: Revelers take to the street Tuesday during a Carnaval parade in Ovar, Portugal. Credit: Estela Silva / European Pressphoto Agency


Portugal refuses to extradite American fugitive George Wright

George wright
American fugitive George Wright was freed by a Portuguese court after it refused a U.S. request to extradite the convicted murderer to complete his 15- to 30-year sentence for the shooting death of a gas station employee during a robbery the day after Thanksgiving in 1962.

Wright, now 68, had been under house arrest since being picked up in September outside his home near Lisbon in September as he headed to a neighborhood cafe.

Wright escaped from a New Jersey prison with three other inmates in 1970 after serving seven years. He hijacked a U.S. airliner to Algeria two years later and had been on the run since.

"I am very pleased and I want to thank the Portuguese courts for having made the right decision," Wright was quoted by the BBC as saying. He said he had a "clear conscience" because accomplices fired the shots that killed the gas station owner, not him.

Wright did admit hijacking the plane, saying that, at the time, he was  a member of the Black Liberation Army fighting "to support the hopes of black people." But he told reporters in his lawyer's office, with his Portuguese wife and two grown children, that he was a changed man.

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Slovakia rejects Europe bailout fund on initial vote

Slovak parliament
REPORTING FROM LONDON –- Lawmakers in Slovakia on Tuesday rejected a proposal to beef up Europe’s bailout fund for debt-stressed nations, but supporters are holding out hope that the measure will pass in a second vote expected to take place within days.

The government was able to muster only 55 votes in the 150-member parliament, well short of the 76 needed for passage. Nine lawmakers appear to have voted no, and the rest abstained or were absent.

The plan to strengthen the rescue fund is widely considered imperative for Europe as it tries to tame a debt crisis that has already forced Greece, Portugal and Ireland to accept emergency loans to stay afloat. But in a tense showdown, a junior party in Slovakia’s ruling coalition refused to back the measure, saying Slovaks should not be on the hook to bail out richer but less financially responsible nations.

Expansion of the fund requires the ratification of each of the 17 countries that share the euro currency. All but Slovakia have given their approval.

Prime Minister Iveta Radicova is now expected to appeal to Slovakia’s main opposition party to help her government pass the measure in a second vote. But its support will come at a steep price: The party’s leader has said he will back the plan only if Radicova calls an early election.

Analysts say she has little choice but to comply. Not to do so would risk throwing already volatile global markets into even greater turmoil.

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Photo: Slovak Prime Minister Iveta Radicova speaks in parliament on Oct. 11, 2011. Credit: Petr Josek / Reuters


PORTUGAL: U.S. fugitive did odd jobs in scenic village, AP finds

Almocagema
He worked odd jobs, most recently as a nightclub bouncer, and lived in a picturesque village near the beach with his Portuguese wife and children.

The Associated Press went to the Portuguese hamlet where George Wright, the U.S. fugitive wanted for a notorious hijacking, spent decades before authorities caught up with him this week.

Townspeople in Almocageme, about 28 miles west of Lisbon, pointed out a whitewashed house with terra cotta roof tiles where they said Wright, now 68, lived with his Portuguese wife and two children, who are in their 20s. A woman who answered the door told the AP she had no comment, then closed the door.

Most locals said they assumed Wright was African, not American.

“He was a very nice guy,” gas station attendant Ricardo Salvador told the news service. “He used to wave as he drove past and I'd shout out, ‘Hey, George!'"

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