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Europe’s Record Jobless Rate Seen Resisting Recovery

Insight: As Ukraine looks west to Europe, Russia’s shadow looms

The milk quota was introduced in the 1980s in response to surplus production and acts to maintain dairy prices plummeting. The measure is crucial to famers in poorer regions of Europe who rely on the market stability the quota brings. In 2015, the European Union will abolish the milk quota, sparking concerns that the move would open the door to market instability. “After the quota, there will be a tremendous impact in market. The volatility of milk price is high already, but when the quota ends, the volatility will increase further,” Paolo de Castro, chair of the European Parliament’s agriculture committee told CNBC. But five member states including Germany and Cyprus were fined a total of 46 million euros on Tuesday for exceeding their milk quotas, casting doubts over the Commission’s hopes of calm in the dairy market after the quota rules end. Agricultural experts said that the quota could be holding back production in some countries and a boost in milk production is possible after it has ended. Removing the quota in countries that have already exceeded the cap is going to help increase the supply of milk, Professor Jeremy Franks from Newcastle University’s School of Agriculture told CNBC, adding that it is “holding back production”. The scrapping of the milk production limit comes as the Common Agricultural Policy, which provides help to farmers across the continent, undergoes sweeping reform. “Areas of higher costs and more disadvantaged places, are likely to reduce production, therefore there will be winners and loser across EU,” he told CNBC. Renwick said milk prices are likely to fall with the boost in milk production after the 2015 quota lift, but global prices will play a big role.

The recovery is happening painfully slowly and thats another reason why well see jobless rates far above 11 percent well into 2015. Even after the currency bloc emerged from its longest-ever recession, economists predict unemployment to keep rising and peak at 12.3 percent in the final quarter of this year. The job markets resistance to an improving economy has been the subject of political debate across the region, with European Central Bank President Mario Draghi urging governments to implement decisive structural reforms to fight unemployment. Stocks Decline European stocks sank today as the U.S. faced the first government shutdown in 17 years and Italian Prime Minister Enrico Letta fought to save his administration. The Stoxx Europe 600 Index fell 0.8 percent to 309.76 at 4:11 p.m. in Frankfurt . The euro was little changed at $1.3530. Italys Letta said hell request a confidence vote for Oct. 2 to try to save his five-month-old administration after Silvio Berlusconi withdrew his support from the ruling coalition and pulled his ministers from cabinet. The Organisation for Economic Cooperation and Development sees Italian unemployment at 12.5 percent next year. Data released at 10 a.m. in Rome tomorrow will show whether joblessness still is near a May all-time high of 12.2 percent. It stood at 12 percent in July.

Despite pressure on trade, including key gas supplies from Russia, which sees Ukraine as culturally its own, Kiev is determined to look West and seal closer links to Europe next month. That’s not what Moscow wants to hear, or will accept. “What we have seen during the past few weeks is brutal Russian pressure against the partnership countries of a sort that we haven’t seen in Europe for a very long time,” said Sweden’s Foreign Minister Carl Bildt last month, describing Moscow’s actions as “economic warfare”. Russia has said it is merely protecting its interests. “Russia is in no way trying to infringe on anyone’s sovereign right to make decisions about their international activity,” President Vladimir Putin said in September. Nearly all the partnership countries do the vast majority of their trade with Russia and rely on it for gas. Moscow is concerned about a flood of European goods entering the country if Kiev signs a free trade agreement with the EU. Trade is particularly sensitive: Russia was Ukraine’s biggest trading partner but not any longer. Now it is the EU, with 27 percent of Ukraine’s exports and 34 percent of its imports, and the volume growing by double digits annually. Russia is also wary of the EU’s broader agenda. Drawing in countries in the region could over time help Europe secure a degree of influence over vital gas and oil supply routes towards the West at the expense of Russia’s dominance. As a result, Putin has threatened to impose punitive tariffs and other restrictions on imports via Ukraine if it goes ahead with the EU agreement. “We would somehow have to stand by our market, introduce protectionist measures,” Putin said last month.

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