Twin Blow For Euro-Zone Economy

The euro zone's unemployment rate rose to a near 15-year high in January, while the annual rate of inflation in the currency area also picked up.

That twin blow for the euro-zone economy underlines the difficulties policy makers face in restoring growth in the face of austerity programs designed to cut high levels of government debt.

The combination of more people without work and rising consumer prices eating into real incomes suggests consumer spending is likely to make only a modest contribution to growth in the months ahead, leaving the currency area heavily reliant on exports.

The European Union's official statistics agency Eurostat Thursday said the unemployment rate rose to 10.7% from 10.6% in December. The latter figure was revised up from 10.4%, as was the figure for November, as Eurostat received more detailed information from national surveys of the labor force. Economists had expected the unemployment rate to be unchanged at 10.4%.

The January rate was the highest unemployment rate since October 1997.

The number of people without jobs rose by 185,000 to stand at 16.925 million, the largest number since records began in 1995.

Eurostat Thursday also said that the annual rate of inflation rose to 2.7% in February from 2.6% in January. That move further above its target of slightly less than 2.0% will make it difficult for the European Central bank to further cut its key interest rate when its governing council meets on March 8.