Yearly euro inflation at record high of 4.1%

BRUSSELS, Belgium (AP) -- Yearly inflation in the 15 euro nations rose to a record high of 4.1 percent in July, the EU statistical agency Eurostat reported Thursday.
Inflation is becoming a headache across Europe as workers call for more money to meet surging fuel prices.

Inflation is becoming a headache across Europe as workers call for more money to meet surging fuel prices.

Prices have not climbed as fast since inflation records started in 1996 for the countries that eventually formed the euro.

Soaring fuel and food prices are Europe's biggest economic problem, eating into household spending -- one of the engines of economic growth -- as people steer away from major purchases and luxury goods.

Accelerating prices and signs that growth is stalling create a major dilemma for the European Central Bank, which acted last month to cool inflation by hiking borrowing costs for the first time in a year.

But the bank may have to hold back from more interest rate increases as the European economy stumbles and companies slash staff.

Eurostat reported that the jobless rate in the 15 countries that share the euro had risen to 7.3 percent in May and June from a year ago. It revised upward an earlier estimate of 7.2 percent for May as unemployment worsened from a record low it hit in December 2007.
Spain, hit hard by a housing slowdown, saw jobless lines increase sharply from June last year as the unemployment rate soared to 10.7 percent -- the highest among euro nations and in the 27-nation European Union. Nearly a quarter of Spanish young people do not have a job.

Ireland also saw a major increase in unemployment as a long boom comes to a sharp end. It reported unemployment of 5.7 percent last month.

Europe's largest economy, Germany, posted a jobless rate of 7.3 percent while France saw 7.5 percent.

Rising unemployment may serve as cold comfort to the ECB, which has pleaded with governments, employers and workers in euro nations to try and avoid wage hikes that could fuel an inflation spiral.

Slowing growth and the risk of further job losses may hold back wage demands despite workers' calls for their pay to keep pace with rocketing prices.

Ground staff at German airline Lufthansa AG have gone on strike seeking a 9.8 percent pay increase.

Inflation is fast becoming a political headache across Europe as workers call for more money and fishermen and truck drivers protest, sometimes violently, that surging fuel prices threaten their livelihoods.

Global oil prices have quadrupled in the last seven years, hitting Europeans hard because they also pay heavy taxes on fuel that can cost them some €80 ($126) to fill up a car's tank