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Eurozone Unemployment Rises to New Highs

Joblessness in the Eurozone reached new highs in October, with 11.7% of the population in the member states out of work. This compares to a 10.4% unemployment rate just a year ago. And inflation has slowed, suggesting that consumer spending activity has weakened even further. 23.9% of young people under 25 are unemployed.

There’s considerable variance here, with Spain up to 26.2% from 25.8%, Greece at a similar level, and Portugal, Ireland, France and Italy in double digits, while Austria is down to just 4.3%. But overall, the Eurozone sits in recession, and European Central Bank head Mario Draghi – who actually could do something about this! – is focused on the second half of 2013 as the target for recovery.

“We haven’t gotten out of the crisis yet,” Mr. Draghi told Europe 1 radio in Paris. “The recovery for the entire euro zone will no doubt begin in the second half of 2013.”

That was a firmer forecast than Mr. Draghi gave earlier this month, when he said only that growth next year would be weak.

Mr. Draghi acknowledged that government austerity measures would bring “a short-term contraction in economic activity,” something he said was “inevitable.” And he warned again that the central bank was ready to take “everything necessary” to maintain stability in the euro zone, a reminder that the central bank has agreed to buy the debts of Spain and Italy in any amount necessary to hold down their borrowing costs.

Well, austerity is actually not “inevitable.” It’s the result of terrible public policy that has brought this region to its knees. If the recovery begins in mid-2013, we’ll hear a lot about the work done by Draghi to bring back Europe, and perhaps some brave soul will talk about how austerity “worked.” But that would neglect several years of anti-growth policies that destroyed entire economies, both from austerity and the stubborn resistance from the central bank to allow more inflation, as well as the entire misguided euro project as a whole.

Maybe policymakers are finally coming around; the German Parliament quickly passed the Greek debt deal, and the ECB’s backstop for Spain and Italy has borne fruit in terms of lower bond rates. But let’s get real. This was a total, unabashed failure, and nobody should forget it.

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David Dayen

David Dayen