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The report presents several figures that warrant closer analysis:
- Employment has been falling since early 2012.
- In April 2012, unemployment in the eurozone reached 11%, with 17.4 million people out of work.
- Youth unemployment in the eurozone stands above 22%, and above 50% in Spain and Greece.
- If current policies are not revised and austerity is not curtailed, a further 4.5 million jobs are at risk.
Austerity policy as a barrier to job creation:
The report explains that the eurozone's fiscal austerity policies have led to sharp cuts in public investment and employment support programmes, with the knock-on effect of suppressing domestic claim and triggering a broader economic contraction.
Furthermore, 13 of the 17 eurozone countries have implemented labour market flexibility reforms aimed at making dismissal easier, yet in a depressed macroeconomic environment, these reforms have done nothing to stimulate job creation. Quite the opposite.
The financial system as the true epicentre of the crisis:
As the report itself states, the 'epicentre' of the crisis lies in the reform of the financial system, an issue that has been wrongly pushed to the sidelines by austerity-focused policies. In countries experiencing recession, banks continue to restrict lending, and as a result, private investment as a share of GDP fell across all eurozone countries in 2011.
The relationship between investment and job creation:
During the years of economic expansion, it was established that a 1% increase in GDP investment translates, within less than two years, into 1.4 million net new jobs across the eurozone as a whole. As the report notes, these figures show that an increase of less than 2 percentage points in investment as a share of GDP would be enough to recover two thirds of the jobs lost during this crisis.
In order to boost investment, the financial system must be put on a sound footing through the following measures:
- stronger regulation to prevent the poor practices of the past.
- limits on excessive risk-taking.
- reform of remuneration structures that are not linked to sector performance.
- the European Central Bank must take on a more active and prominent role.
Once these measures are in place, the eurozone strategy must be built on job creation, achieved by guaranteeing credit for small and medium-sized enterprises, providing public investment incentives, making direct public investments, and developing a shared reindustrialisation plan.
Another key factor is establishing a system to guarantee employment for young people. The Nordic countries have already had successful experience with programmes that offer unemployed young people training, employment, or dedicated job-search support. Some 46% of those young people found work as a result of these policies, and if introduced across the eurozone, the cost would amount to less than 0.5% of government expenditure.
The clear message from this ILO report is that all countries, whether currently running a surplus or a deficit, have much to lose if they fail to implement policies that promote investment and job creation, as opposed to the austerity measures imposed upon them. To achieve this, as outlined above, it is essential to address the root cause of the crisis: reforming the financial sector and tackling its excesses and deregulation.
