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Europe suffers from vicious austerity cycle

Update: May, 10/2013 - 08:37
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by Chu Lan Huong

Workers hit by lower living standards and record high unemployment have been staging protests across Europe for the past week, hoping to persuade their governments to ease austerity measures and boost growth.

In the debt-laden eurozone countries of Spain, Greece, Italy and France, tens of thousands took the streets to demand jobs and an end to a year of belt-tightening.

Recently, the European statistics agency – Eurostat – released shocking figures of the unemployment rate in the continent.

The agency estimated that 26.5 million men and women in the 27-nation European Union, of whom 19.2 million were in the 17-nation eurozone, were unemployed in March this year.

Unemployment across the eurozone has hit 12 per cent for the first time sine the currency was launched in 1999.

Greece has the highest rate of 27.2 per cent, followed by Spain with 26.7 per cent, Portugal at 17.5 per cent and Cyprus at 14.2 per cent.

The trend has been devastating for young people.

According to Eurostat, more than 5 million EU citizens under the age of 25 were unemployed in March.

One out of four under 25 year olds were on the dole in the EU, but that figure was as high as two in three in Greece and Spain, the report said.

The figures have been released amidst criticism of the affects of austerity measures.

Since the end of World War II, Europeans have come to expect a social safety net that cushions the less fortunate until they are able to spring back to work and dignity.

Economic experts said that austerity measures, which have been in place for the last three years since the EU fell into the public debt crisis, were destroying the safety net.

To overcome the crisis, Europe's policy has been to cut public spending and raise taxes in order to eliminate deficits. The US and Japan have taken the road of economic stimulus, injecting massive quantities of money into their systems every month, and already with some visible results.

Austerity measures aim to cut expenditure, which has led to a decline in production and inflation. The consequence is that production is stagnating and employment is cut off. This is a vicious cycle that the EU is yet to find a way out of.

In a meeting of EU leaders in March, measures were discussed to balance austerity policies with economic growth and unemployment.

After three years of struggling with the economic crisis and providing bailouts for Greece, Ireland, Portugal and Spain, EU leaders need to think about creating jobs and growth.

Speaking at the meeting, European Council President Hans van Rompuy said that the EU should find a balance.

The block cannot overcome the crisis if pubic debt continues to rise, but there will be no more jobs if businesses cannot access credit.

Winding up his first European tour this week, Italy's new Prime Minister Enrico Letta called for a change to the EU's focus on austerity, and more pursuit of economic growth and job,

He urged the EU to offer concrete measures to its recession-hit citizen and jobless youths in order to revive hope in the block's future.

French President Francois Hollander at a meeting marking his one year in office urged his government to form 10-year plan of economic investment with the major target of improving the labour market.

‘Lost generation'

According to many analysts, the high jobless rate has pushed the EU into a "nightmare".

"Youth unemployment, that is the real nightmare of my country and the EU," Letta said

Experts said that the high rate of unemployment among young people has led to protests and outbreaks of violence across southern Europe, raising the threat of full-scale social breakdown, including rising crime and anti-immigrant attacks that could further weaken unstable governments.

"We saved the banks, but we are running the risk of losing a generation," Martin Schulz, head of the European Parliament, said.

"One of the biggest threats to the European Union is that people entirely lose their confidence in the capacity of the EU to solve their problems. And if the younger generation are losing trust, then in my eyes the European Union is in real danger," he said

European Union heads of state and government will discuss the fallout from the debt crisis at a summit on March 14-15.

There are plans for a "youth employment guarantee", which would ensure that people under 25 receive either an offer of work, further education or work-related training at least four months after leaving education or being employed.

That is part of a 6 billion euro (US$7.88 billion) initiative to tackle youth unemployment in the worst-hit regions of Europe and head off the prospect of life-long joblessness. But political analysts say it is a case of too little, too late.

European Commission Chief Jose Manuel Barroso said: "We must revive hope, especially for young people. We cannot wait for long, we are all aware this is urgent."

"Youth unemployment has potentially disastrous consequences, especially if it is prolonged, as young people could become cut off from the labour market and society as a whole," EU Social Affairs and Employment Commissioner Laszlo Andor said.

"EU institutions and governments, businesses and social partners at all levels need to do all they can to avoid a ‘lost generation'." — VNS


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