Economic stagnation persists in Europe: austerity policies are the cause

This week Stats Canada has announced it is recalculating its employment numbers because of a processing error in its July tabulation. It will be interesting to find out in what direction and way they erred in their earlier release. The new data is due to be revealed on August 15th , coincidentally my birthday. But the concern over unemployment and the apparent slowing of growth in Canada has prompted me to do some investigation again of how employment is faring elsewhere, particularly in the U.S. and Europe.

This has been a troubled summer with several horrible wars in the Middle East and beyond, understandably affecting the mood and business outlook for many countries. The latest round in the Palestinian Israel conflict, the war in Syria and Iraq and the conflict between the Ukraine and Russia and the creeping march to a new cold war between the West and Russia raise both human considerations of how such horrible wars and hatred are still possible in the twenty first century and concerns about how they may impact on the global economy.

But beyond this context there is still operational in Europe the dogmatic anti Keynesian obsession with budget cutting and austerity in a number of European countries including France where unemployment is stuck at 10.3 % (June 2014); Finland 8.8 %; Portugal 14.1 %; Spain 24.5 %; Greece 27.2 % (May, 2014);Cyprus 15.2%; Italy 12.3 %; Ireland 11.8 %; Sweden 8.0%; Latvia, 11.4%; Lithuania, 10.5 %; Poland 9.5 %; Belgium 8.5 %; Hungry 8.1 and Slovakia 13.8 . Only Germany at 5.0%; and Austria 5.0% could be considered to be doing well.The U.K. which is significantly not in the Euro zone and therefore not subject to the draconian anti Keynesian position of the European central bank is at 6.5% unemployment well below the European average but still elevated unemployment and with a government still committed to austerity.U.S. unemployment is 6.1% and Japan 3.5 %. Luxembourg which neighbours France, Belgium and Germany has an unemployment rate of 6.3 % , the Czech Republic 6.1% ; Belgium 8.5 %; the Netherlands and Denmark 6.5 % (All the data courtesy of Eurostat)

From this picture what sort of tentative conclusions can we draw? For one the European union’s insistence that budget deficits be kept to less than 3 % of the GDP and the central bank’s obsessive support for austerity policies are clear factors in the unemployment problems of many European countries.This would definitely seem to be the case in France, Spain, Portugal and Greece.Geographic contagion also plays a role, as Eurostat’s map of unemployment illustrates. It pays to be close to a well performing country like Germany and Austria.Although this seems less the case in France which in addition to Germany also shares a border with high unemployment Italy, Spain and Belgium. It is well long over due for the European union to modernize and jettison its austerity high unemployment policy paralysis but barring major political shifts this seems unlikely for the near future.

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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 deficit hysteria, deficits and debt, European debt crisis, European unemployment, fiscal policy, France politics+economy, full employment, Greek sovereign debt crisis, monetary policy, Spain, treasury view, U.K. economy, unemployment. Bookmark the permalink.

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