When I started thinking about locating the next Cyprus is really anyone's guess. There are a myriad of factors that can contribute to a financial crisis. One of them is unemployment, and while it doesn't tell the whole story I decided to look at that factor to determine who might be next, or at least who we should be worried about.
According to the Bank of Cyprus, the "harmonized rate of unemployment" moved from 6% in 2010 to 9.5% in 2011 and ended last year at 14%. That is some serious growth in a key factor of economic success for a country.
I then went on to look at the rest of the world... and I found out that 14% unemployment is an enviable rate for at least 74 other nations. I counted 71 countries that had unemployment rates of 15% or more... three other countries Syria, Turkey and Bahamas had rates higher than Cyprus, but less than 15%.
The top of the list was Congo with 67% unemployment, and Africa placed a significant amount of countries in the Top 35. Africa being mostly under-developed shouldn't be our focus. I am not sure that Kenya at 40% or even Ethiopia at 26% have than big of an impact on the world economy.
Let's at least take a look at few countries that could impact the world economy, and I will start with my pick for the source of the next blow up. Spain has an unemployment rate of 26%, which is a lot for a developed nation, but the blow your mind part of the Spanish situation is that unemployment was only 8% in 2008 ... so it has more than tripled in over the last 5 years.
Next is Italy with 11.7%, which is up from 8.2% in 2008. Not nearly the blow up that is Spain, but still an increasing rate while most of the rest of the developed world has seen declines in the rate of unemployment.
Finally, we have France... which has avoided many of the big headlines of being a problem country. I see unemployment steadily rising in France over the last several quarters. Their unemployment rate bottomed at 9.5% in mid-2011, but has since increased in each of the last six quarters. It currently stands at 10.6%.
Based on all of this, do you think that the rate of increase in unemployment can tell us where the next blow up might be? Do you think it’s one of the three nations that I highlighted or are there warning flags elsewhere?
Chime in and let us know!