| GEO Business|
| EU struggles as unemployment rises|
| Updated at: 0239 PST, Friday, January 29, 2010|
BARCELONA: EU employment ministers pledged Thursday to maintain economic stimulus measures as long as the jobless rate in the bloc, expected to surpass 10 percent this year, is on the rise.
Spanish Labour Minister Celestino Corbacho, whose country holds the rotating EU presidency, said steps such as incentive programmes for new car purchases had helped firms to adjust to the "profound economic crisis" Europe is facing.
"We think they should disappear when the economy is strong enough to no longer need these incentives. There are signs of a recovery but it is still a weak recovery," he said at an informal gathering of EU employment ministers.
"As long as unemployment rises we think these measures should be maintained."
The unemployment rate in the EU was registered at 9.5 percent in November and the European Commission forecasts it will breach the 10 percent mark this year, with best-case projections predicting that 7.5 million jobs will be lost over 2009-2010 across the 27-nation bloc.
"With the degradation of our labour market we cannot allow ourselves to act brutally and too blindly to lift our (stimulus) measures," said Belgian Employment Minister Joelle Milquet.
EU member states have spent billions of euros to pull their economies out of recession, causing annual public deficits in many countries to breach a limit of 3.0 percent of gross domestic product imposed by the bloc.
Some economists warn that without the stimulus programmes, the tentative recovery will collapse, with consumers reluctant to spend due to fears of rising joblessness.
But amid mounting investor concern over the ability of member states such as Greece, Portugal and Spain to plug their ballooning public deficits, national governments are also under pressure to rein in their spending.
Europe's biggest business organisation backed the continuation of the stimulus measures but said structural reforms were needed to encourage labour activity and prevent long-term unemployment.
"We believe that if the right measures are taken, European economies can return to creating jobs in a short amount of time," Gerardo Diaz Ferran, vice president of the BusinessEurope employers' association, told the gathering in Barcelona.
Europe had the highest level of labour protection in the world and this must be "modernised" in order to boost job creation, he said.
Reducing labour costs, encouraging greater worker mobility to regions with more jobs and boosting training were among the other measures he recommended.
Speaking ahead of the start of the gathering, a senior official from the EU's main trade union confederation said Europe already had enough labour market flexibility.
"We have seen that the labour market was extremely flexible during the first months of the crisis. Over five million jobs were lost in Europe last year. We can clearly see that an extremely great flexibility exists," Joel Decaillon, secretary of the European Confederation of Unions, said.
The EU officially came out of recession in the third quarter with an expansion of 0.3 percent across the 27 nations of the bloc as a whole.
But while heavyweights France and Germany have already returned to modest growth, suggesting that government efforts to encourage spending are feeding into the broader economy, other member states like Spain and Ireland remain stuck in recession.