Unemployment in the EU Hits Record High
According to Eurostat, unemployment in the Eurozone rose to a record high of 11.6% in September of this year up from 11.5% in August. Unemployment in the EU-27 remained stable at 10.6% in September compared to August 2012. Not every EU country is facing debilitating unemployment conditions. As of July 2012, Austria and Luxembourg had the lowest unemployment rates of 4.4% and 5.2%, respectively. Germany and the Netherlands came in third lowest, sharing a rate of 5.4%. Countries with the highest rates, Spain (25.8%) and Greece (25.1%), are also facing the worst economic conditions. Both states have come under scrutiny from EU and German leadership for poor economic practices preceding the European sovereign debt crisis. Currently, Greece is undergoing extensive austerity measures and public reforms in order to bring down its deficit and debt to manageable levels. Spain is still debating whether or not to take an EU bailout of 100 billion euros to help its ailing banks. Spanish Prime Minister Mariano Rajoy has been delaying the decision for some time due to the possible back- lash from Spanish citizens upset by the EU-mandated austerity measures that come with the funds and that may possibly cause further increases in unemployment and negative GDP growth. Rajoy is also concerned about the growing separatist movements in Galicia and Catalonia.
*Unemployment Rates by Country for Summer 2012.
Youth unemployment is also a major concern. Spain and Greece again lead the way with youth unemployment rates of 53% and 55% as of summer 2012. Young Italians faced unemployment rates at that time of 34.5%, while the EU-27 average youth unemployment rate was 22.7%. In comparison, the UK had a rate of 21% and the US 16.8%. Youth unemployment is calculated slightly differently than total unemployment in that it takes into account those students studying at universities not counting them as “unemployed.” The increase in youth unemployment has caused many young people to leave their countries for former colonies such as those in Africa and South America where it is easier to find work.
*Youth Unemployment Averages for the EA-17 and the EU-27 Seasonally Adjusted from 2000 – 2012.
Growing unemployment is a major problem for Europe. Demand-side economists believe unemployment is a result of decreased aggregate demand, and in order to boost unemployment, the government must provide stimulus by lowering interest rates and increasing public spending. Austerity is preventing the Southern European states from doing this because they must also reduce their deficits and debts to manageable levels in order to increase confidence in foreign investors. Supply-side economists see unemployment as a result of increased regulations, taxes, and union activity that distorts the equilibrium price of labor, causing potential employees to forgo selling their employment. Supply-side economists believe tax cuts, deregulation, and market liberalization lead to long-term growth and higher employment. Like the demand-side ideas, supply-side ideas are hamstrung by austerity tax increases intended to solve the debt issues. There is no magical solution to this problem, and the causes of the debt crisis are problems that have formed over decades. It is to be hoped that is does not take as long to fix them.