Despite a slowdown in growth this year, unemployment in the European Union is expected to drop further, reversing the “infernal spiral” of joblessness, the EU’s chief monetary official said Tuesday. The European Commission predicted economic growth in the 15-nation EU will fall this year by .8 percentage point to 2.1%, while unemployment will decrease by .4 percentage point to 9.6%. EU Monetary Affairs Commissioner Yves-Thibault de Silguy said unemployment was expected to drop to 9.2% next year.
“Between 1999 and 2000, the number of unemployed should diminish by 1.1 million to reach 14.5 million in 2000,” said De Silguy. “It is still a lot, but the infernal spiral has been reversed.”
The EU has long been plagued by high unemployment, which peaked at 11.2% in 1994, and has remained stubbornly in double digits.
“The pace of job creation in the EU quickened markedly during the last two years,” the commission wrote in its report. De Silguy said 4.2 million jobs are expected to be created between 1998 and 2000.
However, the commission’s report warned Germany that it might not follow the general employment trend.
It said Germany’s anticipated economic slowdown “carries the risk of an interruption in the decline in unemployment.” Unemployment was a major issue in the campaign that brought Social Democrat Gerhard Schroeder to power in elections last year. German unemployment stood at 9% this year, in the commission’s forecast.
Spain still has the highest percentage of unemployed at 18.8% last year, but the commission predicted it would decline to 15.8% next year.
Signs of slower growth in the 11 nations that adopted the euro as their shared currency Jan. 1 will add to speculation that the European Central Bank will cut interest rates in the euro-zone to boost the economy.
But De Silguy said, “The slowdown in growth will be limited and temporary.” He said construction investments, private and public consumption and a boost in the global economy should again turn things around.
The commission expects growth in the EU to bounce back to 2.7% in 2000. Economists said the commission’s latest 1999 growth call was optimistic.