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reflections

Oct 8, 2014 | 23:40 GMT

5 mins read

Europe Struggles to Fight Unemployment

(Stratfor)
It can be difficult to separate the important from unimportant on any given day. Reflections mean to do exactly that — by thinking about what happened today, we can consider what might happen tomorrow.

A jobs summit held in Italy on Wednesday illustrated the irony of the European Union's current predicament. Inside a Milan convention center, European leaders discussed plans to boost employment throughout the Continent. Meanwhile, outside the building, unions and student organizations — the apparent beneficiaries of these measures — protested the summit and Italy's plans for labor reforms. The conference, which failed to produce any significant progress, served as yet another reminder of the crisis facing the European welfare state and the difficulty of finding EU-wide solutions to the joblessness crisis.

One of the main consequences of Europe's financial crisis has been a massive surge in unemployment, which rose from 7 percent EU-wide in 2008 to 10.1 percent in 2014. This trend has been worse in peripheral countries such as Spain and Greece, where joblessness has skyrocketed from roughly 8 percent to around 27 percent during the same period. Meanwhile, unemployment in Germany has plummeted from 8.1 percent to 4.9 percent. Europe's young people have most acutely felt the effects of the economic crisis; according to Eurostat, youth unemployment rates, which include people aged 15-24, rose from 15.5 percent to 23.1 percent in the European Union and reached record-high levels in the European periphery.

But these figures tell only part of the story. Many Europeans are not considered active — and therefore are not classified as unemployed — because they have simply stopped looking for a job, while many people considered employed hold only part-time, low-wage jobs. Europeans have a number of safety nets in place to help mitigate the effects of unemployment, including savings, off-the-books activities and solid family structures. In Southern Europe, tourism provides another lifeline to hundreds of thousands of workers, somewhat alleviating the crisis' effects in Greece, Portugal and Spain. But these safety nets are wearing thin, and tourism alone cannot kick-start Europe's depressed economies.

Prolonged bouts of high unemployment can have several long-term consequences. People who are out of work for extended periods risk losing the valuable knowledge and experience that enable them to keep up with a constantly evolving job market. High unemployment has also exacerbated Europe's demographic problems. Long before the crisis began, Europe was trying to cope with low fertility rates and high life expectancies that have resulted in older and shrinking populations, putting greater fiscal pressure on national governments. The economic crisis has caused additional problems for countries in Southern Europe, where significant waves of emigration, particularly by young people, are taking place.

In the short run, emigration can actually reduce tension in countries with high unemployment because it leaves fewer people competing for jobs or requesting unemployment benefits. But over the long term, it weakens the prospects for achieving sustainable economic growth. Europe is fighting a silent war for skilled workers, and Northern Europe is winning. Visitors to Portugal or Greece will quickly notice the overwhelming number of pensioners compared with children, and anyone traveling through the Frankfurt or London airports can see the staggering number of job-seekers arriving from elsewhere in the Continent.

Solutions Remain Elusive

Wednesday's jobs summit highlighted the difficulty European leaders have had dealing with unemployment. The European Union has been holding similar conferences since the late 1990s, but the bloc has yet to produce successful plans to create jobs, especially for youths. The debate over job creation echoes the debate EU leaders have on nearly every Continental topic: Some countries argue that more EU funding is needed to create jobs, while others believe economic reforms and the liberalization of job markets need to come before the European Union commits substantial amounts of money to the issue.

The problem many European governments face is that contradictory pressures have reduced their room to maneuver. Against the backdrop of the Milan summit, the Italian Senate in Rome was debating Prime Minister Matteo Renzi's plans to reform the country's labor market. Renzi survived a confidence vote in the early hours of Oct. 9, but the debate over his planned reforms is far from over because left-wing factions of the ruling Democratic Party and some unions have rejected measures that would make it easier for companies to fire their employees. In France, President Francois Hollande is grappling with similar problems; elements of the Socialist Party have rejected the government's plan to reduce spending to comply with EU demands. These pressures are forcing Rome and Paris to maintain a delicate balance between promising reforms to the European Union and challenging fiscal targets while questioning Germany's leadership of the bloc.

Ultimately, the biggest danger of Europe's unemployment crisis is the rapid erosion of the European Union's very foundation. Across the Continent, high unemployment is generating support for anti-system and anti-European parties, most of which have strong protest elements, as well as anti-euro and anti-immigration elements. These parties are influencing the political agendas of moderate parties, and the crisis is threatening key pillars of EU integration such as the free movement of people, the free movement of goods and a common currency. The greatest threat to the European Union's future is not Greece leaving the eurozone, or Portugal defaulting on its debt, or even Spain's banks collapsing; it is persistently high unemployment.

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