Unemployment to climb further in Spain, Portugal and Greece; End to recession is within sight, poll suggests; Irish economy to outperform southern European peers

Reuters/London

The queues of jobless people across Spain, Portugal and Greece will lengthen further but an end to recession is within sight, according to the latest Reuters poll on some of the eurozone’s most vulnerable economies.

Yesterday’s poll of more than 40 economists, conducted over the last week, followed a meeting of the Group of 20 finance ministers and central bankers on Saturday, who pledged to put growth before austerity to revive the global economy.

More than anywhere else in the world, the southern European economies of the eurozone have borne the brunt of austerity, which has brought a far higher economic and human cost than many of its proponents envisaged in 2010.

Economists expect the jobless rate in Spain and Greece will remain above the 27% mark, even going into 2015, according to the poll.

The eurozone unemployment rate hit 12.2% in May, leaving more than 19.3mn people out of work - equivalent to the combined populations of Austria and Belgium.

“The endless fiscal austerity simply hasn’t worked and unemployment — particularly youth unemployment — remains a serious problem for the eurozone,” said Alan McQuaid, economist at Merrion Stockbrokers in Dublin.

“In the absence of pro-growth measures the jobless rates in ‘peripheral’ countries will remain elevated for some time.”

A separate Reuters poll last week named youth unemployment the top threat to the future of the eurozone economy, alongside its sickly banking system.

At least the latest survey showed Portugal and Spain should manage a return to feeble growth next year, while Greece might escape a six-year depression in 2014, even if outright growth looks a long way off.

Overall, the economic outlook was little changed from the last poll in April.

Ireland, often grouped with the southern European countries because of its banking collapse and big budget deficit, has achieved modest economic growth for most of the last two years, although it fell back into recession at the start of this year.

Economists expect its economy will pick up in 2014, rising 1.9%, and unemployment there to come down gradually — bucking the trend of the other three countries in the poll.

Exports are currently the only growth engine for Spain’s economy, dragged down by dire domestic consumption and the hobbled property markets, which makes recovery dependent on how the international economy performs in the next few quarters.

But it is mainly the US that is driving the world economy forward at the moment. “We’re in for another couple of difficult years,” said Nicolas Lopez, M&G Valores in Madrid.

“(Spain) won’t be seeing strong growth any time soon, considering the imbalances which the country has created and must fix, so, at the moment, I can’t see substantial growth in Spain until 2016 at the earliest.”

Greece, ground zero for the eurozone’s sovereign debt crisis, looks certain to spend its sixth straight year in an economic depression, shrinking around 4.5% this year.

“The overall picture remains mixed. The restoration of balance in the twin deficits — the current account and budget gaps — which reflected the Greek economy’s (disease) for years, is a positive sign,” said Angelos Tsakanikas, economist at Greece’s IOBE economic research institution.

However, the country also faces big political problems. Its government has a wafer-thin majority, while civil unrest is rife, particularly after a bill last week to lay off 25,000 public sector worker in eight months.

Portugal too has been in the midst of a political crisis that threatens to derail the country’s adjustment efforts and exit from a 78bn euro EU/IMF bailout by mid-2014 as planned.

Investor fears were eased at the weekend when the president said he was not calling a snap election, but problems remain.