Newspaper article International Herald Tribune

Euro Zone Unemployment Hits Record High ; Region's Weakness Takes a Toll on Germany as Trade and Output Suffer

Newspaper article International Herald Tribune

Euro Zone Unemployment Hits Record High ; Region's Weakness Takes a Toll on Germany as Trade and Output Suffer

Article excerpt

The jobless rate in the 17-nation bloc rose to 11.8 percent in November, a month in which German exports, imports and industrial orders all declined.

Unemployment in the euro zone rose to a new high in November, according to data released Tuesday that also showed that the troubles in the 17-nation currency bloc were straining its strongest member, Germany.

The euro zone jobless rate rose to 11.8 percent in November from 11.7 percent in October, according to Eurostat, the statistical agency of the European Union. Eurostat estimated that 18.8 million people in the euro zone were unemployed in November, two million more than a year earlier.

Germany has provided momentum to the European economy over the past three years, as strong exports protected the country from the crisis.

But on Tuesday, the Federal Statistics Office in Berlin said that German exports declined 3.4 percent while imports slid 3.7 percent in November from a month earlier. The weakness narrowed Germany's trade surplus to EUR 14.6 billion, or $19 billion.

German factory orders also fell in November amid weak demand from outside the euro area, the Economy Ministry said Tuesday. Orders, adjusted for seasonal swings and inflation, slid 1.8 percent from October, when they jumped 3.8 percent.

"The November numbers are not a one-off but an extension of the current trend of weakening exports," Carsten Brzeski, an economist at ING, wrote in a research note Tuesday. He pointed out that German exports had fallen about 4 percent since May.

"Today's data confirmed our view that exports should have turned from driver of growth into drag on growth," he wrote.

A separate report from Eurostat showed that retail sales fell 2.6 percent in November from a year earlier, though they gained 0.1 percent from October.

The gloomy reports come as the Governing Council of the European Central Bank prepares to hold a policy meeting Thursday, followed by an interest-rate announcement. Despite a sharp decline in bank lending reported last week, which had some analysts suggesting that the central bank might try new steps to stimulate the economy, economists surveyed by Reuters said they expected the E.C.B. to leave policy unchanged in January as it waited for a clearer picture of economic conditions.

Like their counterparts in the United States, Japan and Britain, the monetary authorities in the euro zone have already opened the spigots, allowing banks to borrow essentially as much as they want at the benchmark rate. Mario Draghi, president of the E.C.B., has pledged to do whatever is necessary to ensure the stability of the euro, including, if needed, buying the sovereign bonds of Spain and Italy to hold their borrowing costs to sustainable levels.

The president of the European Commission, Jose Manuel Barroso, said Monday in Lisbon that "the existential threat against the euro has essentially been overcome. "

"In 2013 the question won't be if the euro will, or will not, implode," he said.

The central bank's actions have succeeded in calming markets and driving down government bond yields for embattled countries. The European Commission reported Tuesday that an index of economic sentiment in the euro zone had improved by 1.3 points in December, to 87. "Economic sentiment in the euro area improved among consumers and across all sectors, except retail trade," the commission reported.

Gilles Moec, an economist at Deutsche Bank in London, said the data Tuesday were consistent with expectations that the euro zone economy would remain in recession through the winter, with the unemployment rate possibly rising to as high as 12. …

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