EU frets over jobless youths

Phillip Inman

The eurozone's youth unemployment rate worsened last month to reach a new record high of 24.4%.

Spain's youth unemployment rate increased to 57.4%, only marginally below Greece's August high of 58%, which remains the highest rate of youth unemployment for any country in the eurozone's history.

Italy's youth unemployment rate rose to 41.2% from 40.5% the previous month. In Portugal, it rose to 36.5% from 36.2%.

The startling figures from southern Europe contrast with rates in the north, where Germany has a 7.8% youth unemployment rate and the Netherlands an 11.6% rate.

But a small fall in the number of younger people out of work in the Netherlands and the country's recent exit from a year-long recession failed to prevent it from being stripped of its AAA credit rating on Friday last week.

Ratings agency Standard & Poor's said that weakening growth prospects show the country will struggle to improve its financial stability and generate new jobs.

"The downgrade reflects our opinion that the Netherlands' growth prospects are now weaker than we had previously anticipated, and the real GDP [gross domestic product] per capita trend growth rate is persistently lower than that of peers."

Downgrade disappointing
It cited weakening consumer demand, high levels of personal debt and falling house prices as factors that will keep consumer spending and tax receipts low in the next few years.

Jeroen Dijsselbloem, the Dutch finance minister, said the S&P downgrade to AA+ is disappointing when the economy has returned to growth.

Matthew Cairns, a senior credit strategist at AXA Investment Manage­ment, said S&P's action leaves only three members of the eurozone with a top rating from all three agencies — Germany, Luxembourg and Finland.

He said losing the top rating has fewer consequences for wealthy nations in the north than for those at the bottom; they fall into junk status and outside the portfolios of most international investors.

Italy is perilously close to entering junk status and is lobbying hard in Brussels for more time to cut the country's annual deficit.

The coalition government headed by Enrico Letta said last week it will call a fresh confidence vote in Parliament, despite winning a vote earlier in the week, to confirm the government's majority after the withdrawal of Silvio Berlusconi's Forza Italia party from the ruling coalition.

Letta said the vote will be held after his centre-left Democratic Party elects a new leader on Sunday, and will be based on a new agenda for 2014 to be discussed with coalition partners.

Considering the chaos in Italian politics and the credit-rating downgrades affecting some of the EU's traditional paymasters, France and the Netherlands in particular, there are still many analysts who fear for the eurozone's growth prospects over the next decade. — © Guardian News & Media 2013

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