BERLIN (AFP) ― European unemployment hit a new record on Tuesday and Moody’s cut Slovenia’s debt rating to junk status as German Chancellor Angela Merkel defended her crisis strategy, pushing for twin goals of fiscal rigor and growth.

Merkel was speaking during a visit to Berlin by Italy’s new Prime Minister Enrico Letta, who said this week that “Italy is dying from austerity alone” but in Berlin also pledged to stick to the path of fiscal consolidation.

The leaders met on a day when grim new data showed that European unemployment set a fresh record in March with more than 19 million jobless people ― including one out of four under-25-year-olds.

In more bad news, the international ratings agency Moody’s downgraded Slovenia by two notches to junk status, with a negative outlook, and warned that the eurozone member might need a bailout.

Slovenia had already called off a bond action, saying the sale of around $3.0 billion in five and 10-year dollar-denominated bonds had been “delayed to a likely credit rating move.”

Moody’s then cut the country’s sovereign debt rating to “Ba1” from “Baa2,” placing it in the speculative category, and added that uncertain funding prospects had heightened “the probability that external assistance will be needed.”

Huge volumes of risky loans by Slovenian banks, a recession and a yawning public deficit have sparked fears that Ljubljana might soon become the next eurozone member to need outside help.

The news dropped among a heated debate on how to fix problems faced by the 17-member eurozone, which is pitting austerity champions Germany and Finland against crisis-hit countries which demand pro-growth measures.

Merkel faces a growing chorus of opposition, from France and southern Europe as well as the International Monetary Fund, which has warned of a downward spiral of belt-tightening and recession.

But on Tuesday the German chancellor insisted it was not an either-or question. “For us in Germany, budgetary consolidation and growth are not at cross-purposes but have to go hand in hand to lead to greater competitiveness and therefore more jobs,” she said.