The human face of Europe’s crisis is unemployment. Talk of a lost generation is not overdone. In the U.K. and the euro zone a fifth of young people are without a job. In Greece and Spain the figure rises to almost half. Unemployment on this scale threatens unrest and, in the euro periphery, warns of how much countries must advance if they are to stay in the euro.
The Great Recession has been deep and long, but at least in the United States unemployment seems to be retreating; the rate there has declined from 10.1 to 9 per cent. Europe’s already bad figures – the unemployment rate is 10.3 per cent in the euro zone and 8.3 per cent in the U.K. – could worsen further, if the looming recession materializes.
Among young people the level of unemployment is devastatingly high. More than a fifth of Europeans under 25 are without work. In Greece the figure is 45 per cent and in Spain 49 per cent. Such bad youth unemployment creates multiple dangers. Too many young people are not acquiring skills and experience. They place a burden on government budgets. They risk being alienated or drawn into crime and social unrest.
What can be done? Macroeconomically, the traditional answer is for governments to spend more or tax less to stimulate growth. But European governments find themselves obliged to do the opposite. Spending and public jobs are being cut back hard in the name of austerity.
Microeconomic paths, though, are not closed. Mariano Rajoy, Spain’s prime minister-elect, has said rightly that the country’s notoriously inflexible labour market must be reformed. In the U.K., the Confederation of British Industry is right to suggest a government tax credit for firms that hire young people. Instead of paying unemployment benefit to young people, governments should be funding apprenticeships for them.
Improving competitiveness is also vital. Even with a weak pound, U.K. youth unemployment is as bad as the European average. But the British problems are far less severe than those of the euro periphery, where austerity is deepest, unemployment worst and the social dangers most great. Joblessness, like debt, warns that the periphery won’t be viable within the zone unless it can implement radical change.