Eurozone unemployment falls, strengthening recovery

Brussels

EUROPE'S economic recovery is gaining pace, with eurozone unemployment at its lowest level since December 2008 and inflation on the rise, official figures showed Wednesday.

The EU's official statistics agency said the jobless rate in the single currency area fell to 8.5 per cent in February, down from 8.6 per cent in January. Eurostat said inflation in the eurozone jumped to 1.4 per cent in March, a leap from February's 1.1 per cent. That edges inflation closer to the European Central Bank's (ECB) target although it is still a way off the desired 2.0 percent.

The data are in line with other recent statistics that suggest the European economy is growing at a solid pace after years of weak recovery following the debt crisis.

The steady decline in joblessness comes on the back of three years of massive support from the ECB to help the 19-country single currency zone survive the eurozone debt crisis.

The ECB has bought more than two trillion euros (S$3.21 trillion) worth of bonds during that time, helping trigger growth but struggling to push inflation towards its 2.0 per cent goal.

In a sign of growing confidence in the eurozone recovery, the ECB last month dropped a long-standing pledge that it stood ready to ratchet up bond-buying again if needed - taking a small step towards the stimulus exit door.

But inflation remains well below the central bank's 2.0 per cent target, which may give ECB head Mario Draghi second thoughts about turning the stimulus off completely this year.

"The ECB will tread very cautiously in raising interest rates," said economist Jessica Hinds of Capital Economics.

"We have pencilled in the first hike for September 2019, which is later than investors seem to expect." There were also regional differences in unemployment, which remained high in Greece at 20.8 per cent in December, the last month for which figures were available, Spain at 16.1 per cent, and Italy at 10.9 per cent.

German unemployment remained super-low at 3.5 per cent in February, with the Netherlands dropping to 4.1 per cent.

During the worst of the debt crisis in 2013, eurozone unemployment reached a record 12.1 per cent.

Since then, the economic situation has slowly improved, but unemployment remains much higher than the average rate before the crisis, when it was 7.5 per cent.

Economic growth in the 19-country eurozone hit 2.3 per cent in 2017, the highest level in a decade. AFP