The impact of the crises on European unemployment and the need for new policies

After the 2008-09 global crisis, the recession has been deeper and longer in the EU compared to other areas in the world; even the current recovery is weaker. This problem has particularly concerned the euro area – due to the sovereign debt crisis – and, especially, the peripheral countries. The economic and social impact has been devastating. In some countries unemployment rates have more than doubled, slightly diminishing in the last economic cycle and showing high degrees of persistence; in particular, young people are affected by high unemployment and exclusion from the labor market (NEET). Besides providing new empirical evidence on these phenomena, this chapter focuses on the causes of such negative performance, starting from the EU’s inadequate responses to the double European crisis. Given the collapse of aggregate demand – in particular investment – expansionary macroeconomic policies are needed, going beyond the prevailing austerity approach. While monetary policy has progressively become looser, an adequate fiscal stimulus is still lacking. In addition to an “aggregate demand shock” – for instance a big European investment plan – active labour market policies are required to contrast the unemployment, especially among the youth. Furthermore, some institutional reforms in the governance of the EU are required to make sustainable over time a “genuine” Economic and Monetary Union.