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Europe Contains Jobless Rate, But Faces Summer of Discontent

FILE - A man looks at notices on the window of an unemployment office in Madrid, Spain, April 28, 2020.
FILE - A man looks at notices on the window of an unemployment office in Madrid, Spain, April 28, 2020.

Europe has limited the rise in unemployment caused by the pandemic with a wide array of government support programs, but that cannot hide widespread economic distress and anxiety among workers and small business owners.

First the good news: the unemployment rate in the 19 countries that use the euro only inched higher in May, to 7.4 % from 7.3% in April, official figures showed Thursday. Governments used labor market support programs to cushion the impact of the virus outbreak on workers. By comparison, the U.S. unemployment rate has hit 13.3%.

European governments pay part of workers' salaries in return for companies not laying them off. Governments have also deployed an array of loan programs and other assistance aimed at employers like Marco Chinappi, whose family runs the three-star Hotel Mayor in Sperlonga, an Italian beach town down the coast from Rome.

He was able to take advantage of a state-guaranteed bank loan of 25,000 euros ($28,000) at a low interest rate as well as measures to postpone paying some taxes. That helped him hire back his two seasonal workers, who each get 600 euros in support payments from the government.

"With great difficulty, two months of work, I got the loan guaranteed by the government. Thankfully, because we were really in crisis," he said. "We didn't have any money."

Chinappi said he still doesn't know if the assistance will keep the business afloat, given the hotel was already having financial difficulties and guests are only starting to "timidly" book rooms that would normally have been full by now.

Gianni Cammisola, who sells cured meats, locally made quiche and imported Spanish jamon in the same town also relied on the government loan to keep his family-run business going.

"I have a wife, two kids and I'm earning less this year. The 25,000 (euros) will let me feed the kids, especially if we have another lockdown," he said. Cammisola estimates he lost 15,000 euros during the enforced closure, which coincided with the start of peak tourist season in the days around Easter and two big holidays April 25 and May 1.

But he knows that Sperlonga is lucky, since it typically caters to Roman and Neapolitan tourists, and said the recent June 29 holiday long weekend was packed.

"We lost April and May. But last weekend was like Ferragosto," he said, referring to the Aug. 15 holiday that marks the peak of the Italian summer tourist season. "Thanks be to God," he said, making the sign of the cross amid his salamis.

The government support programs are being used across Europe to contain a surge in unemployment. In Germany, the eurozone's largest economy, 6.7 million people were still on wage support programs in June. The program pays at least 60% of missing pay when workers are put on shorter hours or no hours.

The government support for wages is granted because the companies are not to blame for the economic trouble - countries around the world have had to limit business, travel and public life to limit the spread of the coronavirus. The idea is to support the recovery since companies will not have to recruit and train new workers, having kept their staff.

Another less positive factor limiting the jobless rate is that people have dropped out of the labor force and are no longer looking for work. That could be because they are limited by confinement measures, or because they have to take care of their children who are not in school or daycare because of the lockdowns.

Eurostat estimated that 12.1 million people were unemployed in the countries that use the euro. The agency said that in order to fully capture the unprecedented labor market situation, its upcoming quarterly labor survey to be published July 9 would have additional information about underemployment and job market dropouts.

The European Commission says the 19 countries that use the euro will see their economy contract 7.75% this year.