By Daniel Hunter
Unemployment in the Eurozone could reach almost 22 million over the next four years, up from 17.4 million, unless policies change course in a concerted manner, the International Labour Organisation (ILO) says in a report entitled Eurozone job crisis: trends and policy responses.
The study warns that without a shift in policy direction all countries in the Eurozone — both those currently under stress and their healthier counterparts — will suffer.
“It’s not only the Eurozone that’s in trouble, the entire global economy is at risk of contagion,” said ILO Director-General Juan Somavia.
“Unless targeted measures are taken to increase real economy investments, the economic crisis will deepen and the employment recovery will never take off. We also need a global consensus on a new path for job-intensive growth and globalization. This is a major leadership responsibility of the United Nations, the Bretton Woods system and the G-20."
The consequences of a lengthier labour market recession would be particularly dire in the short term for young jobseekers.
Unemployment has risen in more than half of the region’s 17 countries since 2010 and over three million youth aged 15-24 are unemployed. More than one third of working-age people in the Eurozone are either unemployed or excluded from the labour market, and long-term unemployment is on the rise.
Jobs losses have been especially acute in Southern Europe, but even Austria, Belgium, Germany, Luxembourg and Malta - the only countries where employment has risen since 2008 - are seeing signs that the labour market situation may no longer be improving.
The jobs destruction could have been even worse, as companies appear to have kept workers in the hope that economic conditions would improve. If their expectations don’t come true, worker retention may become unsustainable, leading to significant jobs losses.
In short, all evidence points to the risk of a prolonged labour market recession, threatening the sustainability of the single currency. At the same time, the jobs situation is feeding social unrest and eroding confidence in banks and the financial system, national governments and European institutions.
The report shows that, by embracing a Eurozone growth strategy with jobs at its core, a recovery is still possible within a single-currency setting.
The window of opportunity is closing. But the ILO Global Jobs Pact and the Call for Action on the youth employment crisis, recently launched by the International Labour Conference, offer a portfolio of policies, which Eurozone countries can continue to draw on.
According to the report, austerity has resulted in weaker economic growth and a worsening of banks’ balance sheets, leading to a further contraction of credit, and consequently lower investment and more job losses.
It highlights the problem that Eurozone economies where unemployment is growing have dwindling resources to help jobseekers. The opposite is true in stronger economies. Agreement on broadening the tax base through social dialogue could help finance pro-employment programmes where needed.
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