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DUBLIN — Unemployment in Ireland has reached a 10-year high of 6.7 percent as the economy sinks deeper into recession, heaping pressure on the government to increase its deficit spending.
October's rise from the previous rate of 6.3 percent returned Ireland to a level last experienced in October 1998. The Central Statistics Office report published Wednesday said the number of people claiming unemployment benefits had grown 60 percent over the past year to more than 250,000.
In a statement, Prime Minister Brian Cowen said the rise in joblessness was "regrettable but unfortunately not surprising given the dramatic slowdown in the global and national economy."
The government has returned to heavy deficit spending this year to cover the swelling bill of unemployment payments at a time when tax revenues have slumped. It marks a stunning reversal from more than a decade of the "Celtic tiger" boom marked by record-high tax collections and budget surpluses.
The move also violates Ireland's commitment under European Union budget rules to keep its deficit spending within 3 percent of its gross domestic product. Ireland expects to violate that limit by at least double.
But opposition leaders appealed to the government to go even deeper into the red by cutting sales tax and putting the unemployed to work on state-funded construction projects. They warned that the Irish work force was losing one job every three minutes — and soon could face levels of unemployment and emigration last suffered in the 1980s.
Labour Party leader Eamon Gilmore called Wednesday's figures "truly shocking and suggest that unemployment is now spinning out of control." He called for the government to employ thousands of laid-off construction workers in building schools and insulating homes.
Cowen said the government was doing everything it could without risking punishment from the European Union over its deficit spending.
He noted that American companies continued to pick Ireland as their preferred base within the 15-nation euro zone, including projects unveiled this week for a Marriott Hotels customer call center and a vaccine production plant by Merck Sharp & Dohme Ltd., a British subsidiary of New Jersey-based drugmaker Merck & Co. Both projects received confidential levels of state aid.
But economists also argued that the government must spend more to combat the recession.
Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin, said it was "hard to be anything but negative on the Irish labor market." He forecast unemployment would top 8 percent next year.
"The obsession with stabilizing the public finances will not solve the unemployment problem. Most countries outside the euro-zone recognize that current global economic conditions are the worst in modern times," McQuaid said. "The sooner the Irish government wakes up to that fact and implements fiscal stimulus measures to boost the domestic economy, the sooner we will see an improvement on the labor market front."
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On the Net:
Report, http://www.cso.ie/releasespublications/documents/labour_market/current/lreg.pdf
