Euro zone unemployment has hit a record high, and job losses are likely to keep climbing as the bloc's devastating debt crisis eats away at businesses' ability to hire workers while indebted governments continue to cut staff.

Around 17.4 million people were out of work in the 17-nation euro zone in April, or 11 per cent of the working population, the highest level since records began in 1995, the EU's statistics office Eurostat said yesterday.

'This 11pc level is going to continue edging up in the coming months and probably until the end of the year,' said Francois Cabau, an economist at Barclays Capital who sees the euro zone's economy contracting 0.1pc this year.

'The economic activity situation tells you the story of the labour market. There's been basically no economic growth since the fourth quarter of last year and indicators are pointing to very weak growth momentum for the second quarter,' he said.

ING economist Martin van Vliet said he sees the unemployment rate reaching slightly above 11.5pc if the economy starts to recover later this year. But if the downturn worsens.

As the debt crisis intensifies, companies in the euro zone are trying to keep their labour costs low as they struggle with falling demand and profits, while a German-led drive to cut deficits and debt is pressuring governments to shrink spending.

But some economists say austerity policies in an economic downturn are self-defeating because governments receive less tax receipts as unemployment grows and must pay out more money in jobless benefits.

Although April's joblessness level was the same as March, as Eurostat revised upwards its earlier reading of 10.9pc for the month, another 110,000 people were out of work in April and the jobless rate has risen every month over the past year.

The bloc narrowly avoided recession in the first three months of this year as the economy stagnated but did not contract.