European unemployment remained at the highest in almost 14 yearsin December, suggesting the region's worsening debt crisis andcooling economic growth prompted companies to cut jobs.

The jobless rate in the 17-nation euro region held at 10.4percent from the previous month, the European Union's statisticsoffice in Luxembourg said today. That's the highest since April1998 and in line with a Bloomberg News survey of economists. It hadpreviously reported a November reading of 10.3 percent.

Europe's rising unemployment may undermine consumer demandfurther as governments toughen austerity measures to fight thefiscal crisis. With global export demand cooling, companies areunder pressure to reduce costs. European Central Bank councilmember Ewald Nowotny said yesterday that the region may fail togrow or show a “recession in certain phases” of this year.

“Crisis countries like Spain and Greece will show furtherincreases in unemployment,” said Andreas Scheuerle, an economist atDekabank in Frankfurt. “That's bad news for consumer demand. Weexpect the economy to shrink in the current quarter after acontraction in the previous three months.”

The euro was higher against the dollar, trading at $1.3197 at10:02 a.m. in London, up 0.4 percent on the day.

In the 27-nation EU, the jobless rate held at 9.9 percent fromthe previous month, today's report showed. About 16.5 millionpeople were unemployed in the euro region, up 20,000 from November,the statistics office said.

The euro-area economy will probably expand 0.3 percent this yearafter growing 1.6 percent in 2011, the ECB said on Dec. 8, whencutting borrowing costs a second time in as many months. In 2013,gross domestic product may increase 1.3 percent, theFrankfurt-based central bank said.

In Germany, Europe's largest economy, which has helped power theregion's expansion, unemployment dropped more than economistsforecast in January to a two-decade low. The jobless rate declinedto 6.7 percent from 6.8 percent, the Nuremberg-based Federal LaborAgency said today.

The economy may struggle to gather strength after expanding just0.1 percent in the third quarter as governments from Ireland toSpain step up spending cuts to help restore investor confidence.Concern that the EU would break a promise not to restructurePortugal's debt pushed 10-year yields up by 2.17 percentage pointsto 17.39 percent yesterday as two-year yields surged to a euro-erarecord.

Brussels Summit

European leaders left a Brussels summit late yesterday with noaccord over how to plug Greece's widening budget hole and GermanChancellor Angela Merkel voicing frustration with the Athensgovernment's failure to carry out an economic makeover. The leadersagreed to speed up a full-time 500 billion-euro ($658 billion)rescue fund and signed off on a German-inspired deficit-controltreaty.

With consumers holding back spending and export demandfaltering, companies are looking for ways to protect earnings.Kloeckner & Co SE, Europe's largest independent steel trader,plans to eliminate 6 percent of its 11,577 employees in a cost-cutting program to be implemented by the end of June.

Royal Philips Electronics NV, the world's largest light bulbmaker, said yesterday that it is “cautious” about prospects for2012 after writedowns and sluggish sales helped spark its biggestloss in a decade. The Amsterdam-based company outlined a firstround of headcount reductions in the Netherlands at its lightingunit on Dec. 15 as part of a bigger overhaul involving 4,500 jobsworldwide.

“We are cautious about 2012 given the uncertainty in the globaleconomy, and Europe in particular,” Philips Chief Executive OfficerFrans van Houten said in a statement. “Europe is not a great placefor growth right now.”

At 22.9 percent, Spain reported the highest unemployment rateamong EU states. Greece had a jobless rate of 19.2 percent inOctober, according to latest available figures. Austria and theNetherlands reported the lowest jobless rate with 4.1 percent and4.9 percent, respectively.

Bloomberg News

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.