Unhappy New Year for Europe as Unemployment hits new high

In 2010, the Arab countries of the Middle East and North Africa had the highest youth unemployment rates in the world, at 24%. That was roughly double the rate in most middle-income countries.

Today, Eurozone official statistics showed that the EU as a whole had now matched those conditions, with youth unemployment of 24% across the EU and even within the Eurozone. Overall unemployment hit a new record at 11.8% in November 2012.

These astounding figures come some four years into the ‘recovery’ from the 2007-2008 financial crisis.

It is hard to avoid the conclusion that austerity policies are making things worse year after year. In the crisis hit economies — Portugal, Ireland, Greece, Italy and Spain (dare we call them the PIGIS?) — unemployment has leapt upward from 14% to 18% in just the last two years and is still rising sharply. Spain’s unemployment in November 2012 hit 26.6 percent, up from 23 percent in November 2011. Youth unemployment is over 56%.

Multi-year youth unemployment at these levels is not just a passing distress; research has shown that young workers who enter the job market after several years of unemployment never catch up, in terms of earnings, to their fellows who did not suffer a similar lag. The pain that European leaders are inflicting on their people will thus last for decades, and squander the scarce resource — productive young workers — that the EU will desperately need in the future.

Sad that European leaders, dealt a horrible hand by the over-leveraging of the world economy and the fiscal crisis, resolutely decided to do everything they could — to make things worse.

But Americans should not be smug. We still have our own debt-ceiling debate and spending cuts to thrash out, things that if done poorly could result to more blows to America’s credit rating and future prosperity.

I heard Barney Frank speak yesterday at the Peterson Institute. As always, he was funny yet thoughtful. He said he wanted the US to remain the strongest country in the world — given the contending alternatives. (He said he would be quite OK with Denmark being the most powerful country in the world, but that wasn’t going to happen. Since the alternatives are authoritarian and corrupt China and Russia, better to stick with the U.S.) He said we have to cut spending and make the private and public sector work together. But he also said he longed for the days when Democrats and Republicans would argue over the balance between public and private spending. Today a large group of Republicans considers almost ANY government spending illegitimate, and ANY government actions reprehensible. This makes it impossible to negotiate over the right balance; and in fact hamstrings the private sector as well as the government.

The U.S. has an opportunity to show Europe how to do democratic representative government right. Or we could — as teh Economist cover this week suggests — become like Europe. That is, we could suffer from polarization, an inability to do more than take stopgap measures to kick the can of fiscal responsibility a few meters down the road, and end up with policies that do more harm than good.

We will have two months to see if we can do any better than our sadly unemployed partners across the pond.

About jackgoldstone

Hazel Professor of Public Policy at George Mason University
This entry was posted in The Global Economy, U.S. Politics. Bookmark the permalink.

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