Government aid puts hold on Europe’s jobless rate

Economic distress remains as some workers put off search for a job

SPERLONGA, ITALY— 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 per cent from 7.3 per cent in April, official figures showed Thursday. Governments used labour market support programs to cushion the impact of the virus outbreak on workers. By comparison, the U.S. unemployment rate has hit 13.3 per cent.

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 (about $38,000) 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 ($915) 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.

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.

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 per cent of missing pay when workers are put on shorter hours or no hours.

Another less positive factor limiting the jobless rate is that people have dropped out of the labour 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 children who are not in school.