Unemployment in the euro zone reached its highest level in almost 15 years in February, with more than 17 million people out of work, and economists said they expected job office queues to grow even longer later this year.

Joblessness in the 17-nation currency zone rose to 10.8 per cent - in line with a Reuters poll of economists - and 0.1 points worse than in January, Eurostat said on Monday.

"We expect it to go higher, to reach 11 per cent by the end of the year," said Raphael Brun-Aguerre, an economist at JP Morgan in London. "You have public sector job cuts, income going down, weak consumption. The economic growth outlook is negative and is going to worsen unemployment."

February's level - last hit in June 1997 - marked the 10th straight monthly rise and contrasts sharply with the US where the economy has been adding jobs since late last year.

Economists are divided over the wisdom of European governments' drive to bring down fiscal deficits so aggressively as economic troubles hit tax revenues, consumers' spending power and business confidence which collapsed late last year.

Separate data released on Monday showed manufacturing activity in the euro zone shrank for an eighth successive month in March, providing further evidence for Brussels' forecast that euro zone output will shrink 0.3 per cent this year.

Despite the gloomy economic vista, the European Central Bank is expected to hold interest rates at 1 per cent at its monthly meeting on Thursday, as rising oil prices keep inflation above its 2 per cent target.

"With inflation remaining stubbornly high throughout the euro zone, there is very little hope of a consumer recovery," said Jennifer McKeown, an economist at Capital Markets.

Discussions among ECB board members in Frankfurt are further complicated by a melting away of more optimistic forecasts made at the start of the year.

Even in the bloc's biggest economy, Germany, sentiment in the manufacturing and construction sectors fell in March.

North-South divide

Despite that, the divide between the euro zone's wealthy north and depressed south was again clear on the unemployment front. Years of runaway lending, outdated labour laws and uncompetitive industry in the south have sucked the region into a painful slump.

The jobless rate in Germany was steady at 5.7 per cent of the working population in February, while unemployment in southern Europe rose from already high levels - reaching almost 24 per cent in Spain - the highest in the EU - and 9.3 per cent in Italy.

Spain unveiled one of its toughest ever budgets late last month to make savings of 27 billion euros ($36 billion) for the rest of 2012 as the country seeks to cut its deficit to 5.2 per cent of gross domestic product and win investor confidence.

Spanish Economy Minister Luis de Guindos said last week that the measures would be implemented as soon as possible, adding that any suggestions that Madrid would need the kind of emergency funding given to neighbouring Portugal were "absurd".

In the wider European Union, Eurostat said unemployment stood at 10.2 per cent of the working population, or some 24.5 million people, rising from 10.1 per cent in January. – Reuters