EURO zone joblessness has reached a new high and the poor state of the economy is reducing inflation to near two-year lows, raising the prospect of further interest cuts by the European Central Bank.
In Cyprus the unemployment rate hit 12.9 per cent in October compared to 9.2 per cent in October 2011, and 12.2 per cent in September this year. In the eurozone area the jobless rate rose to a record average of 11.7 per cent.
Cyprus, which is going through its worst recession in around four decades, was behind Greece, and ahead of Spain and Portugal.
And it is set to get worse in the next two years.
According to government figures contained in the state budget, unemployment is expected to reach 13.8 per cent next year and peak at 14.2 per cent in 2014 before dropping a year later.
Eurostat said unemployment across the EU and the eurozone have shown a marked increase compared with October last year.
The eurozone (EA17) seasonally-adjusted unemployment rate was 11.7 per cent in October 2012, up from 11.6 per cent the previous month. The EU unemployment rate was 10.7 per cent compared with 10.6 per cent in September.
The jobless rate in the two zones – EA17 and EU -- in October 2011 was 10.4 per cent and 9.9 per cent respectively.
Eurostat estimates that 25.9 million men and women in the EU27, of whom 18.7 million in the eurozone, were unemployed in October 2012.
Compared with September 2012, the number of jobless rose by 204,000 in the EU and by 173,000 in the eurozone.
Year-on-year, unemployment rose by around 2.160 million in the EU27 and by 2.174 million in the eurozone.
The lowest unemployment rates were recorded in Austria (4.3 per cent), Luxembourg
(5.1 per cent), Germany (5.4 per cent) and the Netherlands (5.5 per cent), and the highest in Spain (26.2 per cent) and Greece (25.4 per cent in August 2012).
The figures show that joblessness has been pushed to the highest level since the euro was introduced in 1999, illustrating the human impact of a public debt and banking crisis that has reverberated across the world.
Struggling companies and indebted households have also lost the confidence to spend and invest, evident in the annual consumer price inflation reading for November, which dropped to 2.2 per cent in November from 2.5 per cent in October.
Consumer price inflation was at its lowest level since December 2010. One of the smallest rises in energy price inflation in a year helped to bring inflation to near the ECB's target of near, but just under 2.0 per cent, opening the door to more rate cuts by the bank.
The ECB last cut its main refinancing rate in July, to a record low of 0.75 per cent, and economists in a Reuters poll this week were more divided than ever on whether there will be another rate cut early next year.
"The outlook is still bleak," said Thomas Costerg, an economist at Standard Chartered in London, who sees an ECB rate cut in the first three months of next year.
"We think that ECB President Mario Draghi will leave the door open for more stimulus in the coming months," he said.
The cost of borrowing for banks and households in the euro zone is already at a record low of 0.75 per cent and economists question whether further rate cuts will do much good, because of a lack of confidence among banks to lend.
The central bank may decide to postpone a rate cut until after its next meeting on December 6 as it tries to keep markets focused on the benefits of its recently-announced plan to buy the bonds of governments in distress and keep their borrowing costs down.
The bond-buying programme has calmed nervy investors who predicted the break-up of the euro zone just a few months ago and many are moving back into Italian and Spanish bond markets.
But the euro zone's economic reality is one of a slowing German economy, stagnation in France, recession for Italy and Spain and an outright depression in Greece, with no signs of a quick recovery.
Many economists blame the spending cuts implemented by almost all governments in the past three years to try to bring down their deficits that ballooned over the past decade.
But in a shift in tone, the International Monetary Fund and the European Commission say now that they may have been too aggressive in pushing for government cutbacks. The Commission is now advocating "growth-friendly fiscal consolidation".
Draghi, speaking on French radio yesterday tried to sound cautiously upbeat and has avoided the word "recession" in his public comments in recent weeks. "The recovery for most of the euro zone will certainly begin in the second half of 2013," he told Europe 1 radio.