BRUSSELS, July 1, (AFP): Eurozone unemployment fell to a near five-year low in May, official data said on Friday, in a rare positive sign for a sluggish European economy struggling to return to solid growth.
The data covers a period before last week’s shock Brexit vote, which economists believe has made the eurozone more unstable and could negatively affect growth and job figures in the medium term.
The Eurostat statistics agency said unemployment in the 19-nation eurozone fell to 10.1 percent in May from 10.2 percent in April.
The rate fell in with analyst forecasts as the eurozone continues a painfully slow recovery after unemployment hit record highs during the worst of the debt crisis.
“Despite May’s decline, the euro-zone unemployment rate … is still well above the 1999-2007 average of 8.8 percent,” said Stephen Brown European Economist at Capital Economics.
Unemployment in the full 28-nation EU was unchanged at 8.6 percent in February, Eurostat said. One of the lowest jobless rate was in powerhouse Germany, at 4.2 percent, while the highest were in debt-laden Greece at 24.1 percent and Spain with 19.8 percent.
Unemployment in the single currency bloc hit a record high of 12.1 percent during the worst of the debt crisis.
“Given that at least some eurozone firms will probably delay their hiring plans after the fallout of the UK’s vote to leave the EU, we still think that the ECB has a lot more work to do…,” said Brown.
The European Central Bank launched a massive stimulus programme in early 2015 but to little apparent effect and last month added even more unprecedented measures in an effort to get the economy back on track.
Meanwhile, the uncertainty sparked by the British vote to leave European Union will “inevitably” harm economic recovery in the euro area, European Central Bank executive board member Benoit Coeure said in a newspaper interview Friday.
The pick-up in the eurozone economy “will inevitably suffer from the ‘uncertainty shock’ that the British referendum has triggered, even if the impact is difficult to quantify at the moment,” Coeure told the French daily Le Monde.
The effect would be all the more damaging because “the recovery in the euro area is already there. It’s healthy and driven by domestic demand and by investment,” even it was being “kept down by high unemployment levels and debt,” he argued.
The victory of the Leave vote in Britain last week has already led to severe turbulence on the financial markets.
“Central banks are continuing to monitor developments and are ready to intervene if financial stability is jeopardised, by supplying liquidity if necessary,” Coeure said.
“The important thing is to clarify how and when Britain will leave, because prolonged uncertainty will carry an economic cost,” both for Britain and the EU, he said.
The priority was to “re-establish confidence between European countries,” by pushing through structural reforms before pressing ahead with integration.
“If everyone plays their part, confidence will return and Europe will be able to move forward,” Coeure continued.
The solution to the problems “lies as much with Berlin, Paris and Rome as with Brussels and Frankfurt,” he said.
In another report, a French prosecutor on Friday said IMF chief Christine Lagarde should stand trial for her handling of a massive state payout to tycoon Bernard Tapie in 2008 when she was France’s finance minister.
The prosecutor recommended the rejection of a challenge by Lagarde to a December court order for her to stand trial for negligence in the affair, which saw Tapie receive 404 million euros ($433 million) in taxpayer money.
The ruling is expected on July 22.
If the order is upheld, Lagarde, 60, will be tried in the Law Court of the Republic, which handles cases concerning offences committed by sitting government ministers.
Lagarde was placed under formal investigation in 2014 for negligence in a protracted legal drama pitting Tapie against a bank which he accused of defrauding him during his sale of sports clothing giant Adidas in the 1990s.
Lagarde, who faces a year in jail if convicted as well as fine of 15,000 euros ($16,000), has denied wrongdoing or that she acted on then president Nicolas Sarkozy’s orders.
She was finance minister under Sarkozy in 2008 when she decided to allow arbitration in the dispute between Tapie and partly state-owned Credit Lyonnais.
As a result of the arbitration, Tapie was awarded the payout to be made by a state-run body in charge of settling the bank’s debts.
The negligence charge comes over Lagarde’s allowing the private arbitration and her failure to challenge the award, which was hugely beneficial to Tapie but prejudicial to the state.
Tapie was ordered to repay the award to the government in February 2015.
Despite her legal woes, the International Monetary Fund board in February named Lagarde to a second term as managing director, which officially starts next week.