Unemployment in Spain and France has jumped to new highs, data showed on Thursday, fuelling a European debate over whether to ditch austerity policies and switch to reviving economic growth. More than 6 million Spaniards and 3.2 million French are unemployed, beating previous highs last seen in 1976 and 1997 respectively.
Spain’s unemployment rate soared to a record high of 27.2 percent in the first quarter of 2013, according to official data released on Thursday. While the rate of increase has slowed, the total number of unemployed people in Spain has now passed the 6 million mark, 6.2 million to be exact, the highest since 1976 when Spain began its transition to democracy.
Spain’s unemployment rate is matched in Europe only by Greece, which posted a 27.2 percent rate in January.
In France, a wave of industrial layoffs saw unemployment rise to more than 3.2 million, a 11.5 percent annual increase, the labour department said on Thursday.
The latest surge in unemployment is certain to provide fresh ammunition to critics of the EU austerity response to the financial and economic crisis in countries such as Greece, Portugal and Spain.
Spanish prime minister Mariano Rajoy, a keen advocate of austerity in his first year in power, has tried since February to strike a balance between austerity and growth, saying Spain would always been disciplined on spending but hinted that he would now try to adopt more expansionary policies.
"There will be no relaxing of the austerity drive because we believe in this policy. Having said that, with all Europe in recession, it would be absurd not to adjust the deficit-cutting path," a government source told Reuters on condition of anonymity on Thursday. "The plan will be a specific, comprehensive and credible set of structural reforms rather than spending cuts for the sake of spending cuts.”
In France, President Francois Hollande has repeatedly insisted that more austerity at this point is a risk, not a remedy to Europe's crisis. Hollande recently abandoned his target of getting France's budget deficit down to 3 percent of annual economic output this year, settling instead for a more accommodative 3.7 percent.
The International Monetary Fund on Thursday called on European policymakers to take more decisive measures to boost growth and job creation, arguing that excessive belt-tightening was holding back global recovery and could end up being self-defeating.
“The risk of stagnation is not remote in the face of weak growth, fragmented markets, impaired balance sheets and half-completed reforms,” said David Lipton, deputy managing director of the fund.
Last week, EU Commissioner Olli Rehn said the eurozone will slow its pace of fiscal belt-tightening to help reinvigorate growth.
However, analysts warn that Europe’s unemployment situation will likely worsen and peak later in the year, until economic growth returns.
“We have to accept that it will be hard to bring down unemployment until economic growth returns, which will not be before the end of the year, and until the European Central Bank does something to ease credit conditions,” said Federico Steinberg, an economist at the Real Instituto Elcano, a Madrid-based think-tank.
By: EW News Desk Team
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