The European Commission’s latest economic forecasts are grim. Overall, growth for the eurozone is expected to be 1.1% this year, down from the 1.7% in the spring forecast.
On the unemployment front the report took an even more negative tone. Labour market conditions are expected to improve very gradually, with unemployment falling from 11.5% today to 10.8% in the eurozone by 2016.
But the headline stats hide the deep divisions among country outlooks. In particular, the huge divide in the prospects for the unemployed across Europe look set to last.
Basically, the countries in the north are doing fine. The ones in the south are a nightmare, with unemployment rates double or triple what you’ll see in Germany.
On the one side, you have the eurozone’s core countries, which have managed to bounce back since the depths of the crisis.
Unemployment in Germany is set to fall from 5.1% this year to 4.8% by 2016
The Netherlands is set to follow a similar trend with unemployment declining from 6.9% to 6.7% over the next two years.
In the middle of the pack France, Europe’s second-largest economy, is feeling the impact of the region’s woes more acutely. The country’s budget deficit is expected to consistently breach the 3% rule under the Stability and Growth Pact. By 2016, one in 10 in the country look set to remain out of work almost a decade since the onset of the Great Recession.
But at the other end of the spectrum are the countries worst hit by the Great Recession and the euro crisis that followed.
In Greece and Spain, unemployment is set to remain above a staggering 20% through 2016 and likely beyond, seven years after the crash:
Incidentally, this type of divergence in economic fortunes is precisely what the European economic union and the single currency were supposed to avoid. The longer Southern Europe is allowed to languish the more damage is likely to the region’s long-term growth potential, as workers become de-skilled or demotivated and the long-term unemployed take huge hits to their lifetime earnings potential.
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