* Euro zone unemployment reaches 11 percent in April
* Data revised up from 10.9 pct in March to 11 pct
* Wide divergences between northern and southern Europe
By Robin Emmott
BRUSSELS, June 1 Euro zone unemployment has hit
a record high, and job losses are likely to keep climbing as the
bloc's devastating debt crisis eats away at businesses' ability
to hire workers while indebted governments continue to cut
Around 17.4 million people were out of work in the 17-nation
euro zone in April, or 11 percent of the working population, the
highest level since records began in 1995, the EU's statistics
office Eurostat said on Friday.
"This 11 percent level is going to continue edging up in the
coming months and probably until the end of the year," said
Francois Cabau, an economist at Barclays Capital who sees the
euro zone's economy contracting 0.1 percent this year.
"The economic activity situation tells you the story of the
labour market. There's been basically no economic growth since
the fourth quarter of last year and indicators are pointing to
very weak growth momentum for the second quarter," he said.
ING economist Martin van Vliet said he sees the unemployment
rate reaching slightly above 11.5 percent if the economy starts
to recover later this year. But if the downturn worsens, "the
risk is for an even higher peak in unemployment," he said.
As the debt crisis intensifies, companies in the euro zone
are trying to keep their labour costs low as they struggle with
falling demand and profits, while a German-led drive to cut
deficits and debt is pressuring governments to shrink spending.
But some economists say austerity policies in an economic
downturn are self-defeating because governments receive less tax
receipts as unemployment grows and must pay out more money in
"The high level of unemployment is putting cyclical pressure
on government expenditure in many of the euro zone's economies
and that is contributing to the lack of confidence in many of
the euro zone's sovereign debt markets," said Philip Shaw, chief
economist at Investec bank in London.
"POISON FOR THE ECONOMY"
Although April's joblessness level was the same as March, as
Eurostat revised upwards its earlier reading of 10.9 percent for
the month, another 110,000 people were out of work in April and
the jobless rate has risen every month over the past year.
While expected by economists polled by Reuters, the data
came as a key business sentiment survey showed a deep slump in
manufacturing across the euro zone and appeared to suggest the
bloc's economy will shrink in the second quarter of this year.
The bloc narrowly avoided recession in the first three
months of this year as the economy stagnated but did not
contract. Still, the picture masks the wide divisions in the
health of Europe's economy, and the same goes for joblessness.
While unemployment fell in Austria to just 3.9 percent in
April, it rose to 24.3 percent in Spain, the highest in the euro
zone. New data for stricken Greece was not immediately
available, having reached 21.7 percent in February.
The number of people out of work also crept up in both
France and Italy to 10.2 percent in April, the euro zone's
second- and third-largest economies respectively.
Joblessness in Germany fell to 5.4 percent of the working
population from 5.5 percent in March, although economists say
given the weakening business sentiment, even Europe's largest
economy cannot expect unemployment to fall much further.
"More uncertainty (from the debt crisis) would surely be
poison for the economy and for companies' willingness to hire
staff," Commerzbank analyst Eckart Tuchtfeld wrote in a note to