Unemployment in Mediterranean EU Countries: Fighting Youth Unemployment

Abstract

The most dramatic problem of European economic policy is the exploding unemployment rate in the Mediterranean EU-countries. This chapter sets out to explain the causal links leading to this major bottleneck in Europe´s economic dynamics. In the first part the causal chain is described in detail as follows: Unemployment is increased by austerity policy of governments - austerity policy is enforced by rapidly rising government debt - government debt has been rising due to bailout of banks and speculative interest rate attacks on countries - banking crisis and aggressive interest rate policy are a consequence of exploding demand for (uncovered) financial promises at global financial markets - uncovered financial promises are the only remaining channel for capital accumulation if increases in (real) labour productivity are dying away on a global scale. The phenomenon of European unemployment thus is explained by the impasse of the dominant global mode of production, which had surfaced first as the financial crisis in 2008. The second part of the chapter uses the insights of part 1 to study the contours of a possible EU employment policy, which can keep welfare levels in Mediterranean EU-countries as high as possible. It is evident that welfare mainly is determined by income, which for the majority of EU-households in turn depends on employment. Employment decisions can be divided into three sets: (1) Employment decisions of public institutions (e.g. reversing austerity policy?) (2) Employment decisions of small and medium size enterprises (e.g. changing work-time regimes?) (3) Employment decisions of transnational corporations (e.g. EU regulation and incentive structures transcending national boundaries?) I all three areas special attention will be on youth unemployment and the inevitable consequences that changes in retirement age will have. In a concluding section it is discussed how far a specific European economic policy (a `Pilot Project Europe´, see [Hanappi, 2013]) that differs from other policies followed in other parts of the world economy is feasible and can be embedded in the global context.