Germany is enjoying the greatest jobs boom in 20 years even as unemployment rises to post-EMU highs across southern Europe (Chicago Options: ^REURUSD - news) , stretching the euro's North-South divide ever closer to breaking point.
The latest Eurostat data shows that the two halves of the currency bloc have diverged dramatically. Germany's jobless rate dropped to 5.5pc in December, the lowest since reunification in 1990, with even lower rates of 4.9pc in Holland and 4.2pc in Austria.
The jobs miracle is in cruel contrast to the slump in the southern bloc, where unemployment has risen relentlessly as austerity bites.
Spain's jobless rate has reached 22.9pc or 48.7pc for youths with Greece fast catching it at 19.2pc. Italy, at 8.8pc, is climbing steadily but this is likely to accelerate as austerity bites and recession deepens.
The jobs data came as Europe's markets rallied on hopes that Germany will back a bigger rescue machinery after securing an EU "fiscal compact" on Monday.
FT Deutschland said Berlin is discussing plans for a €1.5 trillion "mega-fund" in conjunction with the IMF (Berlin: MXG1.BE - news) , but details are vague and Germany has yet to soften its hardline stand on Greece.
Chancellor Angela Merkel said Berlin would not stump up more money for Athens as rescue costs escalate by €15bn to €145bn. The shortfall would have to be covered by "more action from the Greek government, more contributions from private creditors," she said.
Market opinion is split over whether Mrs Merkel is playing poker to enforce discipline, or seriously intends to push Greece into default and EMU exit.
Germany's jobs miracle reflects its industrial structure. Its (Euronext: ALITS.NX - news) top-notch machines and cars are sought by China, Russia, and Mid-East sheikhdoms.
The country shook up its labour markets under Harz IV reforms, allowing it gain labour competitiveness against southern Europe by compressing wages. Its economy is now 20pc-30pc undervalued within EMU against Club Med (Paris: FR0000121568 - news) .
It is hotly disputed whether this was deliberate mercantilism. "A slice of educated opinion in Germany went into monetary union with this idea in mind, seeing the advantage," said Charles Dumas of Lombard Street Research.
For Spain, the jobs crisis can only get worse with the IMF expecting its economy to contract 1.7pc this year. Private analysts say unemployment could top 26pc by year-end.
The new premier Mariano Rajoy has vowed to shake up Spain's rigid labour laws. That risks a fight with trade unions, and will inevitably lead to more jobs losses at first.
Just four years ago the jobless rates in Germany and Spain were similar. That was an illusion of the cycle, with Germany coming out of slump and Spain at the top a bubble. The harsh reality is now painfully clear.
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