Eurozone unemployment rate hits record high of 11.9 per cent as inflation drops below target

BRUSSELS – Unemployment across the 17 European Union countries that use the euro has risen to a record 11.9 per cent but inflation has fallen to its lowest level in two and a half years, official figures showed Friday.

Eurostat, the EU’s statistics office, said nearly 19 million people are unemployed in the eurozone following an increase of around 200,000 in January. That took the rate up from January’s 11.8 per cent, the previous record.

The increase was not a particular surprise given that the eurozone economy as a whole is in recession and expected to continue to contract in the first half of 2013.

The overall rate masks huge divergences though. While Greece and Spain languish under the weight of mass unemployment of over 25 per cent, economies like Germany are operating with relatively low levels around the 5 per cent mark.

However, those Europeans unable to find work may get some relief if the fall in inflation prompts the European Central Bank to cut interest rates again.

The statistics agency reported that consumer prices rose 1.8 per cent in the year to February, down from the previous month’s 2 per cent and expectations for a fall to 1.9 per cent.

It also takes inflation below the European Central Bank’s mandated target of 2 per cent for the first time since November 2010 and to its lowest level since August of the same year.

Analysts said the fall may prompt it to cut its benchmark rate from the record 0.75 per cent as soon as next week. A cut in interest rates would make it cheaper for businesses and families to borrow, spend and invest — thereby generating growth in the economy.

“The lack of price pressures should leave the ECB’s policy options open,” said Jennifer McKeown, senior European economist at Capital Economics. “We think that the Bank might discuss an interest rate cut or other unconventional policies at next week’s meeting.”