Report predicts gloomy EU economy in 2013

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BRUSSELS, Jan. 8 (UPI) -- Unemployment in Europe is soaring, household incomes have declined and the risk of poverty or exclusion is on the rise, a European Commission report indicated.

The 2012 Employment and Social Developments in Europe Review, released Tuesday, said these conditions -- exacerbated by five years of economic crisis and the return of a recession in 2012 -- were especially prevalent in southern and eastern European Union bloc countries.

A schism is emerging between countries that may be trapped in a downward spiral of lower output, higher unemployment and eroding disposable incomes and those countries that have shown good or at least some resilience, the European Commission, based in Brussels, said in the report.

"2012 has been another very bad year for Europe in terms of unemployment and the deteriorating social situation", said Laszlo Andor, European commissioner for Employment, Social Affairs and Inclusion. "But our analysis shows how appropriate labor market reforms and improvements in the design of welfare systems can increase member states' resilience to economic shocks and facilitate faster exit from the crisis."

Andor said Europe likely wouldn't see much improvement in 2013 "unless it achieves greater progress also on credibly resolving the euro crisis, finding resources for much needed investment, including in people's skills, employability and social inclusion and making finance work for the real economy."

The report also found:

-- The average unemployment rate was nearly 11 percent in 2012.

--The lack of tangible recovery has pressured household incomes in the majority of the bloc and increased the risks of long-term exclusion.

-- Countries with higher minimum wages have not priced low-skilled workers out of the market and tend to have higher employment rates for them. Minimum wages also can potentially narrow the gender pay gap.