Euro zone unemployment has risen to its highest level since the currency bloc was born in 1999, aggravating fears that the euro crisis may have mutated into yet another deadly form.
On the one hand, fears of an imminent run on euro zone sovereign bond markets, such as Italy, have dissipated over the past few weeks. This has eased the euro zone's short-term liquidity crisis — the escalation of bond yields to levels so high that governments were in danger of being unable to issue new debt at rates they could afford.
But Tuesday’s news of growing euro zone joblessness reinforced concerns that many member states are instead edging towards a longer-term solvency crisis — the risk that they will eventually go bust because economic weakness will make their debt burdens ever larger. Higher unemployment is already damaging economic output, casting doubts over member states’ ability to raise enough revenue from their ailing economies to close their fiscal deficits.....