October 21, 2014
We are near the sixth’s year ending of a period when we experienced all stages of a crisis that hit the people. And after six years, there rise new risks, deficiencies and obstacles on the stability and growth path.
Since July 2013, at a Summit in Berlin, the European countries addopted a common position on unemployment among young people, setting it as a priority. The same happened in November 2013 at the Paris Summit. Even the recent Milano Summit closed without delivering concrete measures in eradicating unemployment, especially among young people. Three meetings with zero effect.
According to Eurostat, 24.8 million adults (approximately 10.2% of the European workforce) were registered as unemployed in July this year, in all 28 EU Member States. In the euro area, about 18.4 million people became unemployed, especially those in Greece and Spain which recorded the highest percentage: 27.2% and 24.5%. Also, in both countries, the unemployment rate among young people remains as high, reaching even 60%.
Maybe the solution is not adopting measures for the labour market, we have to take into account that economy is in free fall. Maybe that building on an unstable and poorly consolidated foundation does not lead to results, but on the contrary, favors the crisis and chaos.
The economic situation, especially in the euro area, is still subject to severe risk. IMF Managing Director, Christine Lagarde, recently said: “We don’t suggest that the eurozone is heading for a recession but we say there is a serious risk that this will occur if nothing is done. But if the right measures are taken, if the deficit and surplus countries do what they have to do, this is avoidable “.
Also quite elusive in explanations, the IMF chief economist Olivier Blanchard adds that the euro area could become “the main problem” for the world economy if deflation risks become a reality in the region.
Let’s simplify: the main problem of a crisis lies in its hotbed. Will the euro area become a crisis and economic instability core? It is possible, but not likely in my opinion. Maybe depression, but not economic chaos.
So, I return to my thoughts from the beginning of the crisis and I say again – the measures of economic growth should be the priority scheme of revival.
However, it should be noted that meanwhile, there are made efforts to reduce the unemployment in various forms. The EU leaders agreed earlier this year on the European Guarantee Scheme for Young, which reaches 6 billion euros, to combat youth unemployment, without the expected results.
The European Investment Bank, together with the World Bank and the European Bank for Reconstruction and Development have invested in the past two years over 33.6 billion euro in Central and South East, more than the 30 billion target assumed in the joint action plan launched in 2012. In this plan were targeted loans, funding through private equity and financing trade in order to facilitate regional integration and growth generated by exports, the funds being intended to support reforms and investments in promoting competitiveness, creating jobs and social inclusion.
Let us be clear. Funding is important but not the most important. The key in resolving the situation is a VISION.
These two examples are measures that fuel a reality as difficult as before. The need for a viable alternative to the whole system is a current pressure and the lost time cannot be recovered, excepting throught the efficiency of a new system.
The European response to the sovereign crisis in the spring of 2010 was devastating. Rescue faltering initiatives have only intensified the panic, while austerity programs imposed on debtor states led to a growth collapse and worsened the debt, instead of cutting it.
But correcting these mistakes requires a long-term effort. On the short term it will result in little growth or won’t generate growth at all and will even harm recovery. Even sensible long-term investments, such as expansion of renewable energy sources or European transport infrastructure, will tend to create jobs only in the medium term. The contribution of such short-term stabilization programs should not be overestimated.
The new central question outlines a new strategy aimed at growth. The specific question to be answered through a European structural policy is the following: in what areas do we need input to generate a higher output?
In conclusion, what do we put in place of austerity?
A new model of development. I’ll call that the “welfare policy inter and between generations”.
Adrian Marius Dobre