UNEMPLOYMENT RATE ROSE IN EUROPE

AZG DAILY
03-09-2009

Economy

Europe’s unemployment rate rose to the highest in more than 10 years
in July as companies cut jobs to weather the worst recession in six
decades, Blloomberg reports on September 1.

Unemployment in the 16-member euro region increased to 9.5 percent
from 9.4 percent in June, the European Union statistics office in
Luxembourg said. That was the highest since June 1999 and in line
with the median forecast of 28 economists in a Bloomberg survey.

Europe’s economy may struggle to gather strength as some of its
largest companies including Siemens AG eliminate jobs to shore up
earnings. European Central Bank President Jean-Claude Trichet said last
month that rising unemployment may erode consumer spending. Economic
confidence rose for a fifth month in August, adding to signs the
recession has bottomed out.

"We expect European unemployment to rise further over the coming
months, reaching a peak of 11.5 percent around early 2011,"
said Sylvain Broyer, chief euro-region economist at Natixis in
Frankfurt. "We might only see modest economic growth followed by
another phase of contraction next year."

The euro-area economy may shrink about 4.6 percent this year and
around 0.3 percent in 2010, the ECB forecasts. The central bank
has injected billions of euros into markets and trimmed borrowing
costs to a record low of 1 percent to encourage lending and bolster
the economy. The ECB will release its latest economic forecasts on
Sept. 3 when council members meet in Frankfurt.

‘Very Cautious’

"We will have to accept that unemployment will have to augment,
maybe significantly, and that will have a bearing on the evolution
of growth," Trichet said last month. "We have to remain ourselves
very cautious and also very prudent."

Munich-based Siemens, Europe’s largest engineer, said on July
22 that it plans to cut 1,400 more jobs in order to meet profit
targets. Paris-based Air France-KLM Group, the region’s l and putting
workers on temporary leave.

Fighting unemployment must be "a priority," ECB council member Ewald
Nowotny said yesterday in Alpbach, Austria. While downplaying worries
of a "W-shaped recession," Nowotny said: "What I see is the danger
that we’ll have very low rates of positive growth for some time."

European consumers are reining in spending. Retail sales in the region
fell for a 15th straight month in August, the Bloomberg purchasing
managers index showed on Aug. 27. Retailers also stepped up job cuts
last month as profit margins remained under "severe downward pressure,"
the report showed.

Cutting Prices

Carrefour SA, Europe’s largest retailer, on Aug. 28 reported a
first-half loss after cutting prices to encourage shoppers. Chief
Financial Officer Pierre Bouchut said that day there was "no sign
of either improvement or deterioration" and called the situation
"difficult."

European stocks declined as raw-material producers and banks fell. The
Dow Jones Stoxx 600 Index was down 1.1 percent at 233.52 at 9:50
a.m. in London. The euro traded at $1.4341 against the dollar, up
0.1 percent on the day.

In Germany, Europe’s largest economy, the number of people out of
work unexpectedly declined in August after the government introduced
stimulus programs and subsidies to encourage companies to keep
workers on payrolls. Total unemployment fell 1,000 to 3.46 million,
the Federal Labor Agency said today.

The German unemployment rate remained at 7.7 percent in July, the EU
statistics office said. Spanish unemployment rose to 18.5 percent,
the highest in the 27-nation EU, while the jobless rate in Ireland
increased to 12.5 percent.