Eurozone : Unemployment Down and Ratings Up

Written by | Wednesday, December 4th, 2013
M. Guillermo Guttierrez

The Eurozone has logged a decrease in unemployment for the first time since February 2011. The Eurostat reported that unemployment rate had declined to the eurozone’s average of 12.1 percent in October 2013 and therefore marked a fall by 0.1 percent as compared to September this year. The 12.1 joblessness rate suggests that there are still almost 20 million Europeans without a job. As to the entire European Union, the unemployment rate dropped to 10.9 percent.
In any case, both rates – for the EU and the Eurozone – are still higher than those in October last year, when they stood at 11.7 and 10.7 percent respectively. Yet, there is a substantial heterogeneity within the eurozone as well as within the EU itself. Comparing Northern European countries with their counterparts in the South, one can get a broader picture.
Greece and Spain had the highest unemployment rates of 27.3 percent and 26.7 percent, respectively, which is more than five times more than in Germany or Austria, which marked the lowest unemployment.
In the meantime, Standard & Poor has cut the rating of the Netherlands from its triple-A down to AA+. Now there are only three countries in the Eurozone – Germany, Finland, and Luxembourg – to still keep the highest ranking. On the other hand, the rating agency increased the ratings of Spain to “stable” thanks to the country’s budgetary and structural reforms, coupled with supportive Eurozone policies. Moreover, Cyprus’s rating was likewise upgraded to B-, which is still only four notches away from the default.
Yet, both countries do have some experience with bailouts. Spain is going to exit its 41 billion USD bailout of its banks in January 2014, and Cyprus obtained a 10 billion USD bailout in March this year, and thus became the first economy of the currency block to bring in capital controls. Despite the bailouts, investors endorsed the implementation of economic reforms in the country which has likely helped the S&P rating soar.

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