ROME (Reuters) - Millions of discouraged Italians are so convinced they have no chance of finding work that they have given up looking altogether, meaning official figures severely understate the number of unemployed.
Italy's headline jobless rate of around 11 percent is broadly in line with the European Union average and far lower than in Spain, Portugal or Greece.
But data from national statistics bureau ISTAT on Thursday showed that alongside the 2.7 million officially unemployed in 2012, there were 3 million more who said they wanted jobs but were not actively looking for them, meaning they are not counted as unemployed. That is a far higher number than anywhere else in the 27-nation EU.
Comparative ISTAT data for 2012 showed Italy's headline jobless rate of 10.7 percent was roughly in the middle of EU countries - far above Germany (5.5 percent) and the Netherlands (5.3 percent) but dwarfed by Spain (25 percent) and Greece (24.3 percent).
But so-called "discouraged" workers accounted for 11.6 percent of the workforce last year, compared with 4.7 percent in Spain, just 1.8 percent in Greece, 1.3 percent in Germany and 1.0 percent in France.
Many analysts say there is so little work in Italy that, paradoxically, the traditional indicator of unemployment is of little significance in the euro zone's third-largest economy, long mired in recession and with a smaller GDP now than in 2001.
To count as unemployed according to the survey-based data prevalent in the EU, respondents have to be actively looking for work. More precisely, they have to have performed at least one job-seeking action in the four weeks preceding the survey and declare they would accept work in the following two weeks.
A huge proportion of Italians are now not looking for work, but are not working either.
The number in work, at around 57 percent of the working age population, is among the lowest in the EU and below the figures for Spain, Greece and Portugal which have much higher official unemployment rates.
So dysfunctional is the Italian labour market that the "employment rate" is arguably of much more relevance as an economic indicator than the "unemployment rate."
Italy's biggest challenge is to boost its chronically low rates of participation in the labour market, which are among the lowest in the industrialized world, especially among women, the young and the elderly.
(Editing by Hugh Lawson)