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Wednesday, January 7, 2015

The Gulf Between German And Italian Unemployment Tells You Everything You Need To Know About Europe

It's not a good day for the eurozone in terms of economic news. For starters, deflation is here. Europe's consumer price inflation dropped below zero for the first time since 2009. It was pushed over the line by collapsing oil prices, but extremely weak demand means European inflation was already looking feeble. But there were two more figures this morning that might demonstrate the eurozone's fundamental problem even better. Germany's adjusted unemployment dropped to a record low at 6.5% (Germany's own measure is at 5%), and Italy's soared to a record high at 13.4%. When it comes to jobs, the two countries' economies are fundamentally detached and headed in different directions. Here's how that looks:  It's amazing to remember that back in 2008, the German and Italian unemployment rates were basically in the same place. In fact, for the previous decade, Germany's was higher a lot of the time.  It might be a bigger problem for Europe than deflation because it shows just how different these economies are. It's not surprising particularly that many Germans are against stimulus when you look at their economic performance. A little bit might be helpful now, but they're basically doing OK. Very impressively, in fact, compared to most other advanced economies. On the other hand, Italy, Spain, Greece and Portugal (as well as France) are really crying out for some sort of economic boost. So this sort of massive difference could just be a flaw at the heart of a currency union. What suits Germany doesn't suit Italy, and one of them will always be upset or disadvantaged by whatever policies politicians and central bankers agree to. That's probably even more depressing that the deflation figure today.Join the conversation about this story »


READ THE ORIGINAL POST AT uk.businessinsider.com