The jobless rate in the euro area reached the highest on record as the festering debt crisis and deepening economic slump prompted companies to cut jobs. Unemployment in the economy of the 17 nations using the euro held at 11.2 percent in June, the European Union’s statistics office in Luxembourg said today. That’s the highest since the data series started in 1995. It had previously reported May unemployment at 11.1 percent. The euro-area inflation rate remained at 2.4 percent in July, the same as in the previous two months, Eurostat said in a separate report. Policy makers are weighing options to counter the turmoil that has forced five euro-area nations to seek external aid, eroded investor confidence and pushed companies to trim their workforces. European Central Bank President Mario Draghi, who met with U.S. Treasury Secretary Timothy Geithner yesterday in Frankfurt, has pledged to do everything to preserve the euro. “We’re already in the middle of a recession, with contractions in the third and fourth quarters as well,� said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “The ECB will have to take additional measures. The economic side and the stability of the euro zone are clearly larger concerns at the moment than the inflation development.� Spending Plans Consumers may keep spending plans on hold as governments from Spain to Italy seek ways to plug their budget gaps as the economic slowdown worsens. Euro-area economic confidence dropped more than economists forecast in July, with households the most pessimistic in almost three years, data showed yesterday. A gauge of manufacturers’ employment expectations declined from June. Alcatel-Lucent SA (ALU), France’s largest phone-equipment supplier, said on July 26 that it plans to eliminate 5,000 jobs after posting a second-quarter loss. PSA Peugeot Citroen (UG), Europe’s second-biggest carmaker, has announced 8,000 job cuts. Today’s report showed that 17.8 million people were unemployed in June, up 123,000 from the previous month. At 24.8 percent, Spain had the highest jobless rate in June. Portugal reported unemployment of 15.4 percent, with Ireland’s at 14.8 percent. France’s jobless rate was at 10.1 percent. The unemployment report was in line with the median forecast of 28 economists in a Bloomberg News survey. ‘Potentially, Hopefully’ The ECB in June forecast the euro-area economy to shrink 0.1 percent this year, before expanding 1 percent in 2013. Inflation was seen at 2.4 percent and 1.6 percent this year and next, respectively, according to its latest quarterly estimates. Crude-oil prices have dropped about 15 percent over the past three months, helping ease cost pressure on companies and consumers. Euro-area core inflation, which excludes volatile costs such as energy, held at 1.6 percent in June. The statistics office will release a July number next month. “We’re in a recession for the euro zone as a whole,� Christian Schulz, senior economist at Berenberg Bank, said in an interview with Bloomberg Television in London today. “With the ECB now jumping in potentially, hopefully, confidence can improve. For the north of Europe, any stagnation or recession is really caused by the crisis itself.� Draghi is attempting to win Bundesbank President Jens Weidmann’s support for a multi-pronged approach to reduce bond yields in countries such as Spain and Italy, two central bank officials said. The proposal involves Europe’s rescue funds buying government bonds on the primary market, flanked by ECB purchases on the secondary market, they said. ECB Meeting The ECB, which last month cut its benchmark interest rate to a record low of 0.75 percent, said yesterday that it didn’t settle any government bond purchases under its so-called Securities Markets Program for a 20th week. Still, Draghi said on July 26 that policy makers are ready “to do whatever it takes� to preserve the euro, suggesting they may intervene in bond markets again. The next meeting is on Aug. 2. “There’s still an awful lot of skepticism out there of whether they’ll deliver,� Charles Diebel, head of market strategy at Lloyds Banking Group Plc, told Caroline Hyde on Bloomberg Television’s “On the Move� yesterday. “The previous effort to support the market via the SMP were insufficient, they really didn’t do anything but load the ECB balance sheet with a bunch of peripheral bonds. It needs to be more than that and policy makers are probably aware of that.� To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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