IT IS a car crash of a data release. One simply can't look away. Hard to know precisely which part of the euro area's latest unemployment report is
the most grimly compelling. The overall rate, at 12.1%? In the spring
of 2010 unemployment rates in America and the euro zone were effectively
the same at about 10%. There is now a gap of 4.5 percentage points.
Total unemployment? In the first three years of the downturn America did
far worse than the euro area, adding some 7.5m workers to the
unemployment rolls to Europe's 4.7m. Since then total unemployment in
the euro area has risen by another 3.2m while America reduced the ranks
of the jobless by 3.5m. The euro area now has some 19.2m unemployed
Individual country numbers inspire their own brand of
horror. Greek joblessness topped
It is the
youth figures that are most remarkable, however: 59.1% of those under 25
are unemployed in Greece, 55.9% in Spain, 38.4% in Italy, 38.3% in
Portugal, 26.5% in France—3.6m youths in all.
There is blame to go around for this, but one has to reserve special criticism for the European Central Bank...
The ECB has presided over a wrenching disinflation
that has brought inflation well below target, and which is both a
consequence of recession and itself an implement of macroeconomic pain.
Europe's governments have behaved badly, but American fiscal policy has
hardly been better. The ECB faces a more complicated set of political
constraints, but it has already proven how adroitly, aggressively, and
inventively it can act when necessary.
The ECB meets this week. On
Thursday it may announce an interest-rate cut; if it doesn't it is
probable that a cut will be made in June. But a rate cut will not be
enough, not remotely. As things stand ECB policy is scarcely being
transmitted to the periphery, where rates to firms and households are
far higher than in Germany. The euro area needs a jolt to expectations,
targeted credit easing designed to improve peripheral liquidity, and
broad quantitative easing. Mario Draghi has surprised markets before.
Hopefully he will do so again. Because at the moment, the ECB is
behaving as though the main economic failure in the 1930s was the
world's pathetic inability to grit its teeth and endure the costs of