Bloomberg News

European Inflation Holds at Three-Year High; Payrolls Shrink

December 15, 2011

(Updates with euro in fourth paragraph. For more on Europe’s debt crisis, click on EXT4.)

Dec. 15 (Bloomberg) -- European inflation remained at a three-year high in November and employment declined in the third quarter as euro-area leaders struggled to contain the worsening debt crisis.

The inflation rate in the 17-nation euro area held at 3 percent, the European Union’s statistics office in Luxembourg said today, matching an initial estimate published on Nov. 30. A separate report showed payrolls contracted 0.1 percent in the third quarter from the previous three-month period.

The European Central Bank cut its benchmark interest rate last week for the second straight month and forecast that inflation will slow to 2 percent in 2012 and 1.5 percent in 2013. As euro-area leaders try to contain the region’s debt turmoil, the ECB also cut its forecast for growth next year to 0.3 percent from 1.3 percent.

The euro was little changed after the data were released, trading at $1.2975 at 11:06 a.m. in Brussels, down 0.1 percent.

On the month, euro-area consumer prices rose 0.1 percent, the statistics office said. Core inflation, which excludes volatile costs such as energy, held steady at 1.6 percent for a second month.

Fiscal Union

The payrolls report showed that German third-quarter employment grew 0.2 percent from the previous three months. French payrolls gained 0.1 percent, while Spanish employment fell 0.9 percent.

Data published on Nov. 30 showed the euro-area unemployment rate increased to 10.3 percent in October, the highest in more than 13 years, undermining an economy already hit by the worsening fiscal crisis.

Euro-area leaders agreed at a summit last week on a blueprint for a closer fiscal union, seeking to prevent the crisis that led to bailouts for Greece, Portugal and Ireland from engulfing Spain and Italy. They also agreed to start a 500 billion-euro ($649 billion) rescue fund next year.

The plan was unveiled in the shadow of a Dec. 5 downgrade threat on 15 euro nations from Standard & Poor’s. Moody’s Investors Service said on Dec. 12 it will review the ratings of all European Union countries in the first quarter because the summit failed to produce “decisive policy measures” to end the crisis.

--With assistance from Kristian Siedenburg in Vienna. Editors: Patrick G. Henry, Andrew Clapham

To contact the reporter on this story: Jennifer Ryan in London at

To contact the editor responsible for this story: Craig Stirling at

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