Firewall Top-Up Signals Eurozone Expects Crisis to Worsen

Last week, the Eurozone finance ministers voted to increase the “firewall” rescue fund from 500 billion euros ($667 billion), to 800 billion euros ($1.07 billion). The fund was established last year to ensure money was set aside should another European sovereign nation require a bailout.

For the cynical, this move may be seen as a signal that Eurozone officials expect things to get worse in the coming months. Certainly, the recent status of the economy gives little reason for optimism.

In fact, the Eurozone economy is stalling so badly that some analysts believe the Eurozone is already in a recession. The latest manufacturing data confirms activity declined in February while the Purchasing Manager’s Index has recorded eight straight months of sub-50 performance. An index reading below 50 indicates a decline in the month-over-month PMI result.

Looking ahead for the next two quarters, there is little reason to expect growth to pickup in any substantial way. Naturally, the seriousness of the situation is weighing heavily on the region’s employment prospects with unemployment fast becoming a fresh crisis.

Unemployment across the Eurozone ticked higher by another tenth of a percent in February to 10.8 percent overall. This is the worst showing since the euro was introduced in 1999 and shows no sign of abating.

The worst part of the story however, is the discrepancy between individual Eurozone nations. While unemployment for the entire region is 10.8 percent, in Spain, unemployment is actually 23.6 percent with youth unemployment in Spain now verging on 50 percent.

The lowest unemployment rates can be found in Austria at 4.2 percent, the Netherlands at 4.9 percent, and Germany at 5.7 percent.

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