March 1, 2013 / 11:41 AM / 5 years ago

UPDATE 2-Grim jobless, debt figures underscore Italy's crisis

* Jobless rate hits highest since records began
    * Data shows economy has shrunk since 2001
    * 97,000 jobs shed in January compared to previous month
    * Youth unemployment nears 40 pct

    By Gavin Jones and Naomi O'Leary
    ROME, March 1 (Reuters) - Italy's unemployment rate has hit
a 21-year high and its economy is now smaller than it was in
2001, data showed on Friday, underscoring the challenges the
country faces as it struggles to form a government after a
deadlocked election.
    Joblessness jumped to 11.7 percent in January, and
unemployment among 15-24 year-olds rose to 38.7 percent, both
the highest figures on records dating back to 1992, statistics
agency ISTAT said.
    "Italy is in ruins," said Rahma Aden, 28, who travels into
central Rome from the suburbs to do cash-in-hand odd jobs and
cleaning work for about 7.50 euros an hour.
    "People all around me are losing their jobs... If you have
work you hold on to it tight, and keep your mouth closed even if
they treat you badly. Otherwise you'll have your dismissal
letter in your hand in an instant."
    The country shed 97,000 jobs in January compared with
December, while 310,000 were lost compared with the same month
last year.
    Italy has been the most sluggish economy in the European
Union for well over a decade. In 2012, real GDP adjusted for
inflation was below the level of 2001, meaning that its economy
has shrunk overall over the last 11 years.
    The weak economy, high taxes and surging unemployment were
major issues at national elections on Sunday and Monday in which
the anti-establishment 5-Star Movement led by comic Beppe Grillo
emerged as Italy's largest party.
    The election produced no clear majority and outgoing
technocrat Prime Minister Mario Monti, leading a centrist
alliance, performed worse than expected. 
    The next government will have to deal with a debt mountain
that reached 127 percent of output last year, ISTAT's data
showed, the highest since its historic series began in 1990.
    Tough austerity measures introduced by Monti to try to lower
the deficit and debt worsened the recession and hit Italians'
purchasing power.
    The annual fiscal deficit fell to 3 percent of GDP, above
the government's 2.6 percent target and bang on the ceiling
imposed by European Union rules.
    This may allow Rome to leave the European Commission's
excessive deficit procedure, which imposes corrective measures
on countries that exceed the 3 percent level.
    So-called "fiscal pressure" (taxes and welfare contributions
as a proportion of GDP), a closely watched indicator in Italy,
rose in 2012 to 44.0 percent from 42.6 percent, hitting its
highest level since the start of the series in 1990. 
    High taxes contribute to low consumption levels in Italy and
hiring is made difficult by rigid labour laws and high costs for
    Monti failed to fully overhaul the rigid labour rules, and
vowed in his election campaign to attempt a new reform if he
were re-elected.
    "I used to have a shop. Once I paid my staff I had nothing
left to feed myself. Now, if the police come they'll chase me
away," said Carlo, 47, who sells second-hand books on the side
of the road in Rome and did not want to give his surname.
    "Times are hard. I have enough for a drop of wine and a
mouthful of bread."
    Most analysts expect the recession, which began in mid-2011,
to continue until at least the middle of this year, and see a
full-year GDP fall in 2013 of about 1 percent.
    Unemployment in the country's underdeveloped south was
higher than the national average, at 18.3 percent in the last
quarter of 2013 and 50.5 percent among young people.
    Bekin Fisti, 20, moved to Rome from the southern region of
Basilicata to find work as a waiter, but said he lost his last
job when the restaurant closed. In his previous work he would
often wait months for his wages, he said.
    "All the friends I have are in the same situation. Only two
have work, and they are both abroad, one in Denmark and one in
Switzerland," Fisti told Reuters as he waited for a bus in Rome.
    "My mother had to go as far as Genova to find work, and I am
here in Rome. Italy has divided us entirely."  
    Civil servant Franco Di Giuseppe, 40, said he wanted Italy's
leaders to address unemployment as a matter of urgency.
    "It's the most important problem to solve. It's the future
of our young people," Di Giuseppe said. "The situation is

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