Tuesday, 21 May 2013

EUROPE: The Crisis & A Lost Generation

Europe is failing in the fight against youth unemployment. Southern European leaders pander to older voters by defending the status quo. According to Eurostat, the European Union's statistics office, the rate of unemployment among young adults in the EU has climbed to 23.5 per cent. A lost generation is taking shape in Europe.

Instead of launching effective education and training programs to prepare Southern European youth for a professional life after the crisis, the Continent's political elites preferred to wage old ideological battles. There were growing calls for traditional economic stimulus programs at the European Commission in Brussels. The governments of debt-ridden countries paid more attention to the status quo of their primarily older voters. Meanwhile, the creditor nations in the north were opposed to anything that could cost money.

In this way, Europe wasted valuable time, at least until governments were shaken early this month by news of a very worrisome record: the unemployment rate among Greeks under 25 has been above 50 per cent for months. The situation is similarly dramatic in Spain, Portugal and Italy.

Suddenly Europe is scrambling to address the problem. Youth unemployment will top the agenda of a summit of European leaders in June. And Italy's new prime minister, Enrico Letta, is demanding that the fight against youth unemployment become an "obsession" for the EU.

In February the European Council voted to set aside an additional €6 billion ($7.8 billion) to fight youth unemployment by 2020, tying the package to a highly symbolic job guarantee. But because member states are still arguing over how the money should be spent, launching the package has had to be postponed until 2014.

A recent Franco-German effort remains equally nebulous. Berlin and Paris want to encourage employers in Southern Europe to hire and train young people by providing them with loans from the European Investment Bank (EIB). The concept is supposed to be unveiled at the end of May.

Under the plan, the €6 billion from the EU youth assistance program would be distributed to companies through the EIB and thus would multiply, as if by magic. In the end, speculate the plan's proponents, 10 times as much money could be brought into circulation, putting an end to the credit crunch facing many Southern European small businesses.

But even the EIB can't quite imagine how this approach would result in €60 billion. "That number isn't coming from us," say officials in Luxembourg. It seems that €20-30 billion would be a more realistic figure for the coming years.

As it is, there are doubts over the usefulness of broad injections of cash. The first measures coming from Brussels were ineffective and came to nothing. Last year, the European Commission promised the crisis-stricken countries that they could use unspent money from structural funds to implement projects to provide jobs to unemployed youth. Some €16 billion had been applied for by the beginning of this year, funds intended to benefit 780,000 young people. But the experiences are sobering, and concrete successes are few and far between.

The key to combating youth unemployment is to reform the divided labor market. But as an internal report by the European Union shows, the crisis-stricken countries have hardly made any progress on this front. According to the report, Portugal potentially has additional efficiency reserves in its school system, while Greece is showing only a few signs of progress, such as a plan to assist young unemployed women.

The problems associated with a divided labor market are especially striking in Italy, where older workers with employment contracts that are practically non-terminable hold onto jobs, making them inaccessible to younger workers.

But Spain's problem is that workers are divided into two classes. Since the Franco dictatorship, it has been virtually impossible to fire people who already have jobs. Young people, on the other hand, have often had to settle for occasional jobs with almost no social security benefits. They were the first to be affected by the crisis. Those who had jobs lost them, and those who didn't were unable to find work .

It's about time that Europe does something about the problem. The long-term prospects of young people in the crisis-ridden countries are extremely grim. This increases the risk of radicalization of an entire generation. In the face of this crisis, even unconventional approaches are called for to combat not just youth unemployment but also its long-term negative consequences.

European leaders must realize that high youth unemployment is a threat to democracy and could be the kiss of death for the euro zone.

By Guylain Gustave Moke
Political Analyst/Writer
Investigative Journalist