People queue outside the Social Welfare office in Limerick, central Ireland, March 2009.

Europe’s unemployment rate rose to the highest in a decade in May as airlines, banks and builders cut jobs to survive a recession that’s led to soaring losses and fueled bankruptcies.

Even as Europe’s economy shows signs of recovery from the worst recession since World War II, unemployment will continue to climb, according to forecasts from the European Commission and the Organization for Economic Cooperation and Development (OECD). ING Groep NV, the largest Dutch financial-services company, said Wednesday it would eliminate a further 800 jobs in addition to 7,000 already announced.

“We see unemployment carrying on and increasing for some time yet, into next year as well,” said Jennifer McKeown, an economist at Capital Economics Ltd. in London. While there are signs that the slump is easing, “unemployment tends to lag developments in the wider economy.”

Air France-KLM Group Chief Executive Officer Pierre-Henri Gourgeon said on June 19 that he expects to extend job cuts at the company. In Germany, Europe’s largest economy, company insolvencies led to 254,000 job losses in the first half of the year, according to debt collection agency Creditreform e.V.

Prices fall

The annual decline in producer prices in May was the biggest since the data was first compiled in 1981 and exceeded the 5.6 percent median forecast of 21 economists in a Bloomberg survey. From the previous month, prices fell 0.2 percent.

Prices at the consumer level in the euro area recorded their first annual decline in June, according to data this week, and the

European Central Bank has said inflation will probably remain negative for a few months before rising later in the year.

ECB President Jean-Claude Trichet said June 4 that the worst of the recession may have passed. Business confidence in Germany rose to a seven-month high in June and the contraction in manufacturing and services is easing, reports last month showed.

Still, the euro-region economy will shrink 4.8 percent this year and stagnate in 2010, the OECD forecast on June 24. That will push unemployment to 12 percent next year, it said. The EU sees unemployment reaching 11.5 percent in 2010, with the highest rates expected in Spain and Ireland.

Spanish unemployment rose to 18.7 percent in May, the highest in the 27-nation EU, Thursday’s report showed, while the jobless rate in Ireland increased to 11.7 percent.

Source: Bloomberg