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July 2, 2009    

Euro zone unemployment rate hits 10-year high of 9.5%

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by Kay Murchie
Euro zone unemployment rate hits 10-year high of 9.5%

Figures from the Eurostat agency have revealed that the unemployment rate in the 16-nations that share the European single currency rose from 9.3% in April to 9.5% in May - the highest rate since 1999.

Economists had forecast a rise to 9.4%.

According to Eurostat, 15 million people were out of work in May, up by 273,000 from the previous month.

The news comes just shortly after the Central Statistics Office revealed that Irish unemployment hit a 13-year high in June, taking the unemployment rate up to 11.8%.

Ireland has the second-worst jobless rate in the European Union, behind Spain, with an unemployment rate of 18.7%.

Martin van Vliet, an economist at ING, commented: “May’s sharp increase in euro zone unemployment demonstrates that the ‘green shoots of recovery’ are not yet showing up in the labour market.”

Nick Kounis, an economist at Fortis, believes the unemployment rate in the euro zone could peak at around 11.5% at the end of 2010.

The figures come as members of the European Central Bank’s (ECB) rate-setting Governing Council meet in Luxembourg.

It is widely expected that the central bank will leave interest rates at the record low of 1%.

Meanwhile, there are fears for the euro zone after figures earlier this week revealed that the area is heading for a period of deflation.

A short period of deflation (where prices fall rather than increase) could be a serious threat to the economy because it deters consumers and businesses from spending in expectation of falling prices.

Eurostat said inflation in the 16 countries using the euro turned negative in June for the first time since the single currency was introduced over a decade ago.

Prices in the euro zone fell 0.1% over the last 12 months - the inflation rate had been 0% in May.

The ECB‘s target rate for inflation is just under 2%.

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