European obsession with austerity and inefficient job search repeats error of the 1930s

There was discussion in the financial press today and yesterday about the fact that the EU has extended the deadline by which they expect countries like France, Spain and Italy to meet the 3% deficit to GDP targets which the EU has foolishly built into their common currency. Because of the EU obsession with labour market supply side approaches which emphasize inefficient job search and labour market rigidities as the explanation for unemployment along with the ECB’s refusal to have a well developed program of quantitative easing, unemployment continues to be very elevated in a number of European countries and growth very sluggish. Youth unemployment is also at record levels. For example, overall unemployment is at 28 % in Spain and youth unemployment at 56.4 %; 10.5 % in France youth rate  24.3 %; U.K. 7.9% youth 21.0 %; and 27 % in Greece, youth rate 62.5 %. The youth rate is 62.5 % in  Italy; 30.4 % in Ireland 42.5 % in Portugal and 23.7 % in Sweden. The overall unemployment rate is 12.2 % in the Eurozone and youth unemployment in the EU27 22.8 %(All data courtesy of Eurostat) .These are horribly elevated rates of unemployment which contribute to unnecessary misery, waste of human potential, lost output and social instability.Germany, Austria and the Netherlands are doing much better. Youth unemployment in Germany is 7.5 %, 8% in Austria and 10.7 % in the Netherlands.

By contrast unemployment continues to fall albeit slowly in the U.S. where the Fed has pursued a much more stimulative policy with a substantial program of QE and prior to the blockade of stimulus in the US congress the President and Congress had implemented a significant, if not quite large enough stimulus. The contrast with Europe both in terms of policy and results is large. I keep hoping that Europe will mend its ways before its too late but unfortunately things are not as promising in Europe at the moment.


About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
This entry was posted in austerity, classical economics, deficit hysteria, European unemployment, France politics+economy, full employment, Greek sovereign debt crisis, quantitative easing, Spain, U.K. economy, Uncategorized, unemployment and tagged , , . Bookmark the permalink.

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