Brussels, 08/01/2013 (Agence Europe) - On Tuesday 8 January, as it presented a report on the evolution of employment and the social situation in Europe in 2012, the European Commission underlined that a “new pattern of divergence” had appeared within the EU, especially within the eurozone. “A new divide is emerging between countries that seem trapped in a downward spiral of falling output, fast rising unemployment and eroding disposable incomes, and those that have so far shown good or at least some resilience” to the crisis, the Commission states.
The divide runs across the line of latitude that separates North and South Europe. It is particularly marked in the eurozone as the difference in unemployment rates between the two groups has increased since end 2008 to settle at 7.5% in 2011. The Commission feels it is easy to identify the causes of this growing divide, which can be put down to a combination of insufficient effective mechanisms for macro-economic stabilisation and not enough reforms in certain states to make their labour markets more “dynamic”.
Today, the ball is, therefore, in the court of the member states. It is true that the Commission will soon be proposing new measures to promote social investment (to encourage active insertion and social entrepreneurship), but the more ambitious proposals have already been put forward. On one hand, the European Council now has six months in which to create a detailed roadmap containing a social chapter for setting up an enhanced economic and monetary Union (EMU) (see EUROPE 10752), an initiative that should meet the first concern identified by the Commission. Also, the Commission hoped with its report to show that the measures it suggested in its “employment package” (see EUROPE 10597),“youth employment package” (see EUROPE 10597) and the latest annual growth review (see EUROPE 10745) are the best ways to strengthen resistance by the different countries to “seismic shocks”, such as the financial crisis and the sovereign debt crisis that ensued.
Commissioner Laszlo Andor, responsible for employment and social affairs, has stressed the main objective of the report which aims to help governments to better identify problems linked to employment and the social situation. He nonetheless commented that the analytical work had already been done by the Commission (“employment package”, etc.), thus suggesting that the European governments should now have all the tools needed for finally coming to the same conclusions.
One might ask what conclusions are reached by the report. Stock taken of the 2012 situation of employment and the social situation in member states shows in particular that: - the setting in place of lifelong learning programmes for active persons, maintaining an unemployment register and the payment of unemployment benefits are measures that promote a return to employment; - the role of social protection systems (help for child-minding, for example) is not just to reduce poverty but also to promote participation in the labour market; - the reduction in taxes on labour helps to reduce unemployment; - and a higher minimum wage has beneficial consequences, especially on insecure jobs.
All the above findings help to explain why the North-South divide of the eurozone has widened since 2008. The countries in southern Europe have, since that date, been in a “more vulnerable budgetary position”. The common point in the conclusions of the report is that the national authorities should maintain, if not increase, some of the budgets allocated to social assistance, which act as shock absorbers to counter the economic and social shocks of recession. In southern Europe, these automatic stabilisers are losing their impact, the Commission states.
Could this be an avowal that the successive austerity plans and the race to improve public budgets were badly calculated, if not ineffective? Is the Commission also tending towards such an avowal recently made by two IMF economists regarding the fact that the forecasts for the consequences of austerity policies were wide of the mark (see EUROPE 10758)? Andor argued against this, saying that the reduction in public deficits was necessary, although it should be accompanied by guarantees aimed at ensuring “social cohesion”. One possible solution would be to reduce labour tax while increasing VAT, “green” taxes and/or land taxes.
Unemployment continues to rise. A few hours before Andor presented the report, the EU Statistical Office (Eurostat) presented its latest unemployment data. The record of the two last decades has again been beaten. With a rate of 11.8% in the eurozone and 10.7% in the EU, the month of November 2012 confirmed the upward trend that has shown no signs of weakening since early 2011. This is not by chance - the Commission report points out that the income of households is in constant decline and that the risk of poverty is growing, as is the risk of social exclusion. (JK/transl.jl)