Euro Zone is facing the most diverse economic recovery and labour market since its creation, which makes European Central Bank’s (ECB) monetary policy making harder than ever. Partial reforms pursued by governments coupled with easy monetary policy from European Central Bank (ECB) has led to the rise in employment across Euro Zone, however any level that can be called as normal remains far off.
As per latest report unemployment declined to 10.2% in March, which is in clear contrast to 4.9% unemployment rate in U.S. and 5.1% in UK.
As of now inflation is low with thanks to lower oil price, however if inflation do return before fragmentation is removed ECB would face critical policy choices, weather to raise rates to prevent any overheating of stronger economies with lower unemployment rate or to keep easing to bolster growth across the weaker ones like Greece, Spain, Cyprus.
European governments need to coordinate together to pursue reforms in such that economies converge and fragmentation gets reduced. There isn’t much ECB can do over this front.
As of latest employment report fragmentation still high, despite improvement in the overall labour market –
- Euro area unemployment despite drop to 10.2%, which is lowest reading since 2011 debt crisis, a lot more is to be done as more than 16 million still remains unemployed in Euro area.
- Fragmentation is quite large. While Germany enjoys lowest unemployment rate in the region at 4.1%, Greece and Spain have their rates above 20%. In fact Greece’s unemployment rising again.
- Even in France, every one in ten is unemployed.
- Euro area’s third largest economy, Italy is suffering unemployment as high as 11.4%.
ECB has done almost everything a central bank can do, now it’s time for the government to take action.
The material has been provided by InstaForex Company – www.instaforex.com