Eurozone Unemployment at Record High: The Consequence of Austerity Programs

Eurozone Unemployment Rate, Dec 2007 to March 2013

As reported in the recent release from Eurostat, Eurozone unemployment rose again in March to a record 12.1%.  This is the highest rate ever for the Eurozone, and indeed the highest rate since at least 1983 (the earliest date for unemployment data reported by Eurostat) for the underlying countries.

Austerity programs do increase unemployment, despite what senior European officials have said.  On this, one might recall the famous assertion in June 2010 of Jean-Claude Trichet, then head of the European Central Bank, that austerity programs would be expansionary and lead to job creation.  As was discussed in an earlier post on this blog, in a June 2010 interview with La Repubblica (the largest circulation newspaper in Italy), Trichet said:

Trichet:  … As regards the economy, the idea that austerity measures could trigger stagnation is incorrect.

La Republicca:  Incorrect?

Trichet:  Yes …

And in an interview a month later in the newspaper Libération of France:

Libération:  Do the austerity plans announced amid monumental disarray by the Member States pose the risk of killing off the first green shoots of growth?

Trichet:  It is an error to think that fiscal austerity is a threat to growth and job creation. …

At the urging of Trichet, other European officials, and especially German government officials, most of Europe then began to reverse the stimulus programs of late 2008 and 2009  –  programs that had stopped and then reversed the free fall resulting from the 2008 economic and financial collapse.

Exactly one year after Trichet made his famous assertion, unemployment rates in the Eurozone began a steady upward march, which have continued ever since.