Page last updated at 12:05 GMT, Friday, 30 January 2009

Eurozone jobless at two-year high

Jobs agency in Germany
Eurozone unemployment is rising as the economy worsens

Unemployment across the nations that share the euro rose to its highest level in more than two years last month, as more firms laid off staff.

The eurozone unemployment rate totalled 8% in December, according to the latest official European Union data, up from a revised 7.9% in November.

Unemployment was highest in Spain, which recorded a 14.4% figure.

Meanwhile, eurozone inflation fell in January to 1.1%, its lowest level in almost 10 years, from 1.6% in December.

While Spain saw the highest unemployment last month, the lowest was Netherlands on 2.7%, and Austria at 3.9%.

Fresh rate cut?

The latest unemployment and inflation figures will increase the pressure on the European Central Bank (ECB) to further cut eurozone interest rates to help bolster the economy and bring inflation closer to its 2% target.

The decline in Spain's property market is an extraordinary story
Ben Shore, Europe business reporter

Earlier this month the ECB trimmed rates by half a percentage point to 2%, its fourth reduction since September, when rates stood at 4.25%.

However, eurozone interest rates remain above the current 1.5% in the UK, and between 0% and 0.25% in the US.

The ECB makes its latest decision on interest rates next week, but the bank's president Jean-Claude Trichet has so far hinted that there won't be a fresh rise until March.

Economist Matthew Sharratt of Bank of America said the latest data had put the Bank in a difficult position.

"They [members of the ECB's governing council] have probably put themselves into a corner for next week's meeting," he said.

The eurozone unemployment figures for December do not include Slovakia, which earlier this month became the 16th nation to adopt the single currency.

For the 27-nation European Union as a whole, the unemployment rate rose to 7.4% in December from 7.3% in November.



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