Simmering crisis getting worse in EU

A side from the worsening sovereign debt turbulence, European politicians are facing another crisis, the shortage of jobs for youths.

I met Peter, a 23-aged Romanian driver and his older brother in downtown Brussels when I waited at the roadside for my rescue company to come and fix my flat tire. Seeing me, they stopped their truck and asked whether I was in need of help.

While changing the tire, they said they had been working in Greece for five years until the debt crisis hit the economy. Now they share a job as truck driver for a grocery owned by a Romanian woman in Brussels. But they have no contract and the pay is low.

They refused any payment but instead asked me to take their phone number and to let them know if I heard of any jobs.

According to official statistics, the unemployment rate among people aged between 18 and 24 is higher than the rate among those aged between 25 and 74 in all of the European Union member states, with one in every five unemployed.

The sharp rise in youth unemployment is most evident in Spain, where the rate soared to as high as 43 percent in the first quarter this year. The Netherlands, Austria and Germany were the only three EU member states with a youth unemployment rate below 10 percent.

The picture of youth employment in the EU is dispiriting and is only expected to get worse over the coming months.

One major reason for this is that European politicians are mainly focusing their attention on cutting fiscal spending and implementing austerity policies to avoid government defaults or bankruptcies.

Since last year, the European Council has held several summits in Brussels with the member states, but the debates mainly focused on economic governance and financial rescue packages and little was done to boost growth and create jobs.

It is absolutely right to correct the old model of excessive deficits and the EU has already capped the debt ratio, implemented rescue plans and encouraged structural reform in the long run.

However, the politicians cannot afford to ignore the gloomy unemployment indicators. The politicians should know that the overall negative effects of the economic crisis affect young people especially hard, particularly those who face long-term unemployment and social exclusion, as well as youths in regions with unfavorable economic prospects.

They should also be aware of the long-term adverse effects that early unemployment can have on young people, as well as the significant proportion of young people who are neither in employment nor in education or training and thus are at risk of social exclusion. The recent riots in British cities and protests one after another in many European cities are clear indications of the consequences of inaction.

It is true that the politicians have been faced with a very difficult policy dilemma. Traditionally, they should resort to fiscal incentives and loose monetary policies to create jobs as they did in 2008 and 2009. But this year the EU's economic growth for the second quarter was only 0.2 percent year-on-year, due to cuts in fiscal spending and a severe reduction in external demand, and the politicians do not have much room to maneuver.

However, they should bear in mind that the debt crisis and unemployment are interwoven challenges, which need balanced, not conflicting, solutions. For example, several countries, such as France and Italy, have announced they will extend the retirement age in order to cut pension spending. Other EU countries are ready to follow the suit.

But jobs are limited. More elderly people in the job market means less opportunities for young people. So politicians need to carefully weigh the pros and cons before introducing this.

Meanwhile, creating more jobs and letting young people work would help solve the EU's debt problems as a larger workforce would mean more tax revenues. In the meantime, the risks of social unrest would also be reduced.

Of course, education is the best insurance for securing a job. So the EU member countries should offer equal training opportunities for young people to help them enter the job market.

Meanwhile, the EU should remove barriers and offer easier channels and information to facilitate the free flow of labor among member countries to guarantee young people, like Peter, a decent job with contract.

The author is China Daily's chief correspondent in Brussels.

(China Daily 09/13/2011 page8)