The Euro-zone could lose 4.5 million more jobs in the next four years unless the region shifts away from austerity, the International Labour Organization (ILO) has warned. That rise would take unemployment in the 17-nation bloc to 22 million.
The ILO said a concerted policy shift away from austerity towards job creation was needed. It's not only the Euro zone that's in trouble, the entire global economy is at risk of contagion, it said.
The report said that all 17 countries in the Euro zone would suffer both those currently under stress and their healthier counterparts.
Unless targeted measures are taken to increase real economy investments, the economic crisis will deepen and the employment recovery will never take off, said ILO director-general Juan Somavia.
The report added that the consequences of a longer period of austerity would be particularly severe for young people. It said that unemployment had not been as bad so far in the downturn as it might have been because some companies were hanging onto staff in the hope of an imminent recovery.
If their expectations don't come true, worker retention may become unsustainable, leading to significant jobs losses, it warned.
The ILO recommends: Making support for the financial system conditional on the resumption of lending to small businesses; Making shareholders pay for the bailouts of banks; Guaranteeing unemployed young people training, education or work placements; Changing pay levels in different Euro zone countries to address differences in productivity.
The unemployment rate in the Euro zone hit 11.1% in May, according to official figures from Eurostat. It took the total number of people out of work to 17.56 million, the highest level since records began in 1995.
In Spain, which has the highest unemployment rate in the Euro zone, one in four people is now out of work, The youth unemployment rate in the Euro zone stood at 22.6% in May, meaning 3.4 million people under the age of 25 were jobless.