Unemployment in Germany has hit its lowest level in over 20 years as the economic gap between the wealthiest and poorest eurozone nations widens.

Official data from Germany showed joblessness in Europe's largest economy fell for the second month in a row in January to reach 6.7%, the lowest since the re-unification of Germany in 1990.

But separate data from the EU's statistics office Eurostat found that unemployment across the entire 17 member eurozone hit 10.4% in December - the highest in the single currency's history.

After two years of a deep debt crisis and budget austerity, the total number of eurozone residents out of work has risen to 16.5 million people.

The rate steadily crept up throughout 2011 as growth stalled and recession loomed.

Joblessness in Spain reached a new high of 22.9% in November and December while in Greece it was 19.2% in October, the latest data available.

Martin van Vliet, an economist at ING bank, said: "We're looking at a further increase over the coming months, so that is worrying.

"...At a certain point this could lead to political unrest."

The gloomy figures risked undermining recent promises by EU leaders to focus on creating millions of new jobs to try to kickstart their floundering economy.

Trevor Greetham, portfolio manager at Fidelity Multi Asset Funds, said: "A budgetary straitjacket risks merely shrinking Europe's economy and it will do nothing to ease the periphery's competitiveness problems, the underlying cause of the sovereign crisis."

According to Tuesday's data, Austria boasted the eurozone's lowest jobless rate at 4.1% in December, followed by the Netherlands at 4.9%.

This reinforced the idea of a north-south economic divide in the euro currency bloc.

In Portugal, which is expected to follow in the footsteps of Greece and be the next country to need a debt write-off, unemployment reached 13.6% in the final month of 2011.

As Greece's problems moved toward a resolution, concern grew that Portugal might need rescuing after Lisbon's borrowing costs soared.

Greek Prime Minister Lucas Papademos raised investors hopes by saying negotiators had made "significant progress" in talks to strike a debt restructuring deal, with the aim of having a definitive agreement by the end of this week.--Courtesy of weborange