* Euro zone unemployment at 10.8 pct in February
* EU Commission says data shows need for reform
* Sharp divide between north and south
By Robin Emmott
BRUSSELS, April 2 (Reuters) - 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
Joblessness in the 17-nation currency zone rose to 10.8
percent - in line with a Reuters poll of economists - and 0.1
points worse than in January, Eurostat said on Monday.
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.
February's unemployment level - last hit in June 1997 -
marked the 10th straight monthly rise and contrasts sharply with
the United States where the economy has been adding jobs since
late last year.
"We expect it to go higher, to reach 11 percent 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."
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 percent this year.
The European Commission, which along with Berlin is a
driving force behind the EU's debt reduction strategy, said
joblessness showed countries must enact difficult reforms.
Public resistance is rising in Italy to Prime Minister Mario
Monti's labour market reforms, while Spain's premier, Mariano
Rajoy, faced his first general strike last week.
"This is why, more than ever, it is important to carry out
structural reforms in countries where the growth potential
remains low and where we don't see the creation of new and
better jobs," Amadeu Altafaj, the spokesman for the EU's top
economic official Olli Rehn, told reporters.
Despite the economic vista, the European Central Bank is
expected to hold interest rates at 1 percent at its monthly
meeting on Wednesday, as rising oil prices keep inflation above
its 2 percent 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.NORTH-SOUTH DIVIDE
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.
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 percent of the
working population in February, while unemployment in southern
Europe rose from already high levels, reaching almost 24 percent
in Spain - the highest in the EU - and 9.3 percent 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.
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".