Eurozone unemployment

Just like a year ago, we are hearing a lot of guff about how the euro crisis is over, and just like a year ago the people I talk to in Brussels are becoming increasingly alarmed by the complacency of the European establishment. It does seem as though the only thing that makes Europe’s useless political class worry is the risk of imminent cardiac arrest, as proxied by bond yields and the like; but the cancer of unemployment will do just as much damage if allowed to progress unchecked.

Here are the latest Eurozone unemployment statistics. Just because we are becoming used to this sort of news does not mean that they are even remotely acceptable. They are grim.

There are certain costs that are obviously not worth paying to keep the EMU experiment going. One is a dilution of the continent’s democratic traditions. Another is unemployment rates of the sort we are seeing in Spain and Greece. No doubt crocodile tears will be shed by supporters of status quo macroeconomic policies, but such responses are no longer acceptable. EMU supporters, and €-sceptics who are worried about the costs of an EMU break-up, now have to start being very concrete in terms of proposing Eurozone economic policies, including short run monetary and fiscal policies, that can start reversing these trends in 2013. (A group of us tried to do so here, for example.) And then we need to see such policies being implemented, quickly.

You have to live through times like this to really appreciate the wisdom of Keynes’ famous line about the long run.

37 replies on “Eurozone unemployment”

Thanks for the post Kevin. I just saw the latest stats on the IT website and came over here to see if there was a thread on the topic.

The figures and the lack of policy response are an absolute disgrace. What rubs salt into the wound is the fact that in the EU figures are unchanged because unemployment in the non-EZ EU is actually falling.

And still we have interest rates in the EZ higher than any other of the 4 major currencies areas, even though the EZ has the highest unemployment and has been in a recession since around the middle of last year. As Martin Wolf says, this is because the EZ is “hysterical” about inflation.

Again, where is Honohan in all this? We can expect cultural fairy tales, superstitions and dogma regarding fiat currency to influence the likes of Weidmann, but where are the speeches by regional Central Bank heads expressing concern for the overall well-being of the EZ and its unemployment crisis.

I would also expect more from peripheral politicans. The combined weight of the PIIGS would be impossible to ignore if they just aligned their policy positions regarding the senseless and counterproductive simulataneous austerity pushed by the core. Their collective line should be, “If you want austerity and consolidation in the periphery, then we need expansion in the core. Period. Otherwise, cooperation goes out the window.” In this regard Mario Monti has been a disaster for the EZ in the way he has cooperated and pushed the austerity agenda in Italy.

The fact of the matter is, the EZ is rapidly turning into a Germanic Empire where the only metrics that matter are unemployment, GDP and inflation in the core and to hell with the rest. I expect the EZ unemployment figures will be greeted with a shrug of the shoulders in Berlin, where such a human disaster will be seen as necessary. After all, no pain, no gain.

European economic policy is currently restricted to options jointly approved by Germany, the ECB and the European Commission and the lack of focus on unemployment is thus fairly easy to explain.

The short version:

Germany does not have an unemployment problem, the ECB does not see unemployment as its problem and the European Commission is convinced that unemployment will not be a problem once everybody gets with the neoliberal plan.

The long version:

Unemployment is not a pressing political issue in Germany for a variety of reasons including wage repression, a large domestic industrial base, geographical factors and control over the levers of European policy. The policies that would reduce unemployment in the periphery would also damage the class interests of the voters for the ruling German conservative political parties and go against the dominant strand of economic thinking in Germany (Goldbug met Neoliberal and begat Ordoliberal).

The ECB is not concerned with unemployment by reason of its mandate (which it deeply loves) and the philosophical outlook of bankers in general (pro capital and anti-labour).

The European Commission is concerned with unemployment in the abstract but so delusional in its outlook, as repeatedly demonstrated by Olli Rehn’s Northern Neoliberals Regiment’s glorious war against the fiscal multiplier, that all of its policy suggestions are either sociopathic (forced labour migration, less worker protection) or wildly counter productive (collective austerity). (The answer is private ownership and a single European market for everything, now what was your question?)

It frankly baffles me that anyone who cares about social justice, democracy or economic stability is not working to undermine EMU.

The ECB’s mandate of price stability and price stability only is another of the great flaws at the heart of the Euro project. The Fed has a dual price stability/employment mandate . The ECB doesn’t. It is like Ronseal. It does exactly what it says on the tin.

Not to mention either the vile media spin directed against the unemployed who are all personally flawed and undeserving of any sympathy whatsoever.

It’s going to get worse.

Social safety nets being dismantled everywhere to service debt. It’s a ‘fittest will survive’ world it seems. The N European debtor /creditor mentality rules and overrides any other consideration…In their own words:

“Mrs Hasselfeldt. “Our goal with reform programmes isn’t to boss anyone around but to restore the economic competitiveness and ensure budgetary rules are met.”

Mrs Haselfeldt said there was a “lot of understanding for Ireland’s special situation”, echoing language of a 2012 Dublin-Berlin communiqué, but CSU MPs worry that agreeing to Dublin’s additional bank debt demands could annoy voters at home or, worse, have an unintended effect elsewhere in Europe.

“Our concern is that a readjustment of conditions could weaken the reform incentive for other countries that are not as succesful for Ireland,” said Thomas Silberhorn, MP for the city of Bamberg.”

Very clear. Now, if one accepts fine, but if one does not accept, what are you going to do about it? At some point, there must be an agreed, more robust, direct approach from Ireland on its debt levels….in full knowledge of the potential consequences. A more intense debate must be had to clearly inform the Irish public of what those consequences will /may be and why. The debate around Conor Killeen’s article in the FT was excellent. So too was the discusion around CMcC’s suggestion that EU court action be initiated in relation to Ireland’s odious debt element (too easily dismissed I think….It would be totally on the menu in the US context…note AIG’s planning to sue the Fed!).

@ All

The latest comment by Paul Krugman fits into the theme of this thread.

I liked this bit in particular.

“I’ve seen some reporting describing the paper as an admission from the IMF that it doesn’t know what it’s doing. That misses the point; the fund was actually less enthusiastic about austerity than other major players. To the extent that it says it was wrong, it’s also saying that everyone else (except those sceptical economists) was even more wrong. And it deserves credit for being willing to rethink its position in the light of evidence.”

How can he,and the other “sceptical economists”, possibly lose with even the IMF – or, at least, its chief economist – behind them?

@ All

A similarly alarmist view from AEP of the Telegraph.

The problem with it is the countries concerned were the laggards before the euro came into existence and it is hard to see how their failure to cope with the demands of membership should now be a cause of a general collapse.


” The ECB doesn’t. It is like Ronseal. It does exactly what it says on the tin. ”

Not really! Ronseal, as far as I know, will not threaten to burn your house down, if you refuse to accept its ‘unbeatable’ formula, liberally applied.


“How can he,and the other “sceptical economists”, possibly lose with even the IMF – or, at least, its chief economist – behind them?”

Krugman makes a simple and very valid argument and bases it on simple economics. What is wrong with that?
It is crystal clear that the current ‘solutions’ are not only not working but are causing huge hardship for millions. Surely he is to be commended for pointing that out.

Surely the biggest danger by far to EMU is the economic conditions being experienced in Greece and Spain, with over 50% youth unemployment in each of those countries.
Those young people need the EZ, EMU, and the EU itself like a hole in the head. It is destroying their futures and their lives.
If there is a way a surefire way of killing the EU itself, it is the continuation of existing policy (non) responses and an ignoring of the plight of peoples affected by the crisis.

Whatever about Greece and Portugal (how were never really at the races) but certainly Spain, Ireland and Italy all had pretty vibrant economies prior to the euro . They certainly weren’t laggards.

Interview with German Opposition Leader

‘Merkel’s Track Record Is Disastrous’

Sigmar Gabriel, 53, is the national chairman of Germany’s center-left Social Democratic Party (SPD), which hopes to return to power after national elections in September. In a SPIEGEL interview, he discusses recent controversies surrounding the party’s chancellor candidate and his view of critical issues.

No real change here. German Ideology has to be taken on. How?

I think this thread is the European component of the global financial crisis in microcosm.

Some one in the reality based community (Kevin O’Rourke in this case) points out that the current neoliberal policy set is failing by socially and economically important metrics and needs to be changed.

The response from the normally voluble right of the spectrum is akin to the sound of a single tiny tumbleweed in an empty field on a still day. The horribly distended super thread on negotiating with Germany has had more than twice the traffic in the same time.

The response of the right to the misery that their policies are causing is a mixture of feigned ignorance, real ignorance and studiously ignoring it.

@Joseph Ryan

Krugman makes a simple and very valid argument and bases it on simple economics. What is wrong with that?

Krugman’s problem is that he has repeatedly been proven correct in disputing the narrative and logic of the political right regarding the depression caused by the global financial crisis, simple as.

The right despises and fear him he sees them for the charlatans and political extremists they are and because his grasp on actual reality is out of step with their peculiar idea of some higher “political reality” (eg “Why every man on the street, all serious people, every person of standing, knows that excessive government spending is the source of our problems! Globalization made me beat my butler! Tom Friedman is a genius! More port!”)

This is not an honest argument about the best path to economic recovery – it is all out attempt to seize power by the very same forces who precipitated the global financial crisis and who have painfully extended the European component of it.

Indeed, you can count on politicians (at least on the continent) as long as the bonds are acceptably low. Nothing new for us in France: since Miterrand’s famous “contre le chômage on a tout essayé” in 1992, it has hovered between 8-10% (except a few year during the tech bubble at the end of the nineties). And it really seems like Miterrand’s successor thought exactly like him. So, as far as the French establishment is concerned, only bond hikes are likely to elicit serious thinking in the not too distant future – they couldn’t care less about unemployment. Let’s hope more dynamic polities can raise their voices in EU summit when it comes to coming up with imaginative solutions …

There are two problems to address: 1) the regional aspect and aggregate demand 2) problems/challenges at country level.

I am among the minority that has no safety net and there have been two recessions in a decade. I have also worked in a large manufacturing operation in peril and the fear of unemployment among people in such a situation is not an abstraction.

Nancy Folbre, an economics professor at the University of Massachusetts, in The New York Times this week referred to the book “Unequal Democracy: The Political Economy of the New Gilded Age,” by the political scientist Larry Bartels of Vanderbilt University, who she says offers evidence that “elected officials are utterly unresponsive to the policy preferences of millions of low-income citizens.”

The unemployed and others struggling to survive can of course be invisible or distant to more than politicians.

In the US, the impact of public spending cuts to date have been at state level and Floyd Norris of the NYT said last week: “The December jobs figures out today indicate that there were 725,000 more jobs in the private sector than at the end of 2008 — and 697,000 fewer government jobs. That works into a private-sector gain of 0.6%, and a government sector decline of 3.1%. In total, the number of people with jobs is up by 28,000, or 0.02%.”

Replication of the demand conditions that existed before the credit boom came to an end in early August 2007 cannot be achieved while President François Hollande has shown the limits of his growth pact and tax ambitions. Austerity could well be eased and the suggestions of a German economics institute to raise pay levels by an average of 4%, would help but would not be insufficient.

New Eurozone governance structures will have to be in place before there are big moves on legacy issues. It would be a good thing but as with hopes for bipartisanship in Washington DC or a deescalation of tensions between China and Japan, short-term progress is unlikely.

Despite labour cost rises in China, globalisation will continue to bring pressures. China will reach parity on R&D spending with the US by 2022; in the US, young firms – – those five years old or younger – – , which are mainly responsible for net job creation, now comprise fewer than 35% of all firms, down from nearly 50% in the early 1980s.

France has had a trade deficit every year since 2002 and a budget deficit every year since 1975; Southern European countries were particularly hit by Chinese competition in their traditional industries while Eastern European countries had a greater tradition in manufacturing when there were integrated with the West.

Spain’s jobless rate was 24% in 1994 and 21% in 1997; Italy’s jobless rate was 11.5% in April 1998 and 11% last November.

In December, Spain had 4.39m unemployed — 9.4% or 457,000 were under 25. The Eurostat youth jobless rate is 56.5%, which relates to those who are not in full-time education.

Following big property bursts, there are big challenges with skill levels in both Spain and Ireland while Germany and Denmark have had longterm successful apprenticeship systems.

Last year, the president of South Korea urged employers to hire more high school graduates and promised, as an example, to hire some for presidential Blue House. “Professional footballers just need to be good at kicking balls,” Lee said. “They don’t need to graduate from Seoul National University.”

The government is also investing in vocational schools designed to put young people on a career track without going to college. “Reckless entrance into college,” Lee has said, is “bringing huge losses to households and the country alike.”

As for Ireland, I have said in the past that high growth firms are not typically in high tech but it will take sometime yet for the reality check that relying on university research to create a jobs engine is a costly delusion:

Irish Economy: Innovation, a failed enterprise policy and inconvenient facts for 2013

Chronic unemployment is bad for the corporate sector. Demand dies on the vine. It’s not just the unemployed who don’t spend. Their neighbours also hold back, afraid of the same fate.
All of this bond worshipping is well and good but without support for demand there can be no growth.

@ Ciaran: ” …Spain, Ireland and Italy all had pretty vibrant economies prior to the euro …”

Not really Ciaran. The metric used to measure economic activity is a tad unreliable (aka: unfit for purpose). You would have to get data on both the amount of new money (ie: credit) and the increase in debts of different types (commercial and private). The level of gov borrowing to maintain public spending is also relevant. Gov debt could (and was) inflated and devalued away. However, increases in private debts axiomatically means a decrease in future disposable incomes. Less disposable income, less domestic demand, less employments. These events may be postponed, but they eventually arrive and the sh*t hits the fan!

A country only survives economically if the real income surplus it earns from genuine exports of the products and services that fully originated within that country, are re-distributed within the country and re-invested in upgrading productive enterprises (without diminishing any existing employments) and not into financial chichanery. This basic model has been trashed. And we are ‘suprised’ that we experience an economic regression?

It is fearfully difficult to counter the torrent of propaganda that promotes and sustains the ultimately disasterous economic policies being advocated by those engaged in financializations. And it really does not help opponents of these dreadful policies when you hear (and read) the dopey, mis-informed and mis-leading commentaries in the media. Sentiment (everyone can enjoy that Free Lunch) ALWAYS trumps rationality.

“When truth conflicts with the legend: print the legend!”

Kevin, an excellent point. With current policy, things are not going to get better in Ireland for a very long time (>5 years). We are condemning everyone in their twenties to a lifetime of low earnings and financial struggle.

Imagine if we had pulled out of the euro in 2009 or 2010? We would be through the initial shock by now, the punt nua would be at 60% vs the euro, both our public sector and private sector would be super-competitive and companies wouldn’t be able to hire people fast enough. Would it be painful? Of course, but better than 10+ years of slow internal devaluation.

We need to leave the euro.

Unemployment doesn’t grab people because of social welfare (which we can’t afford btw)
For some people unemployment is souls destroying – for others it’s not. But people have never taken to the streets because they’ve got nothing to do – they only take to the streets when they’re hungry or feel threatened (or threatening). Sorry but you know what I mean hopefully

A Brian H: Hi there!

“We need to leave the euro.” Maybe, but I would first like to experience a very determined effort by our domestic politicians to acknowledge publically the serious implications for our economy by agreeing to join up in the first instance. [They won’t. They’re consummate cowards and fibbers].

This leaves it up to the citizens, who as Eureka and others have stated, are a bunch of sleepwalking sheeple (with adequate grazing – for the moment!). Whom you need to be protesting are the Grey Tigers – using anything that makes a loud noise (flares would be useful after dark) and to keep this cacophony continuous until the government buckles (three months?) and announces a series of debt Jubilees (private unsecured debts; most residential mortgages) and slams the problem onto the insolvent zombie financials (no more taxpayer money). There would be consequences (bad ones*) and these need to be explained by the protestors before they embark. If there is no significant public support (66%+) for the outcomes – then stay at home. Let the sheeple overgraze their meadow. Then THEY will protest.

It might be instructive for all who attend this site to engage in a meaningful intellectual analysis as to the social and political rationale (the Whys) that suppport the practice of ‘social welfares’. These are NOT Free Lunches! They have deep, unseen and significant economic costs (some folk may have to forgoe both a supper and a breakfast for their Free Lunch). And, its not about ‘who pays’; its about ‘how shall social welfares be paid’.

* Increasing living costs with simultaneous declining incomes. 😎

Leaving the Euro wouldn’t fix the banks though. And it wouldn’t do much for FDI. There are no easy solutions innit.


Replacing the euro with a devalued punt would have a tremendous effect on FDI – there would be a tidal wave of investment.

As for the banks, let them go out of business and new ones enter the market. Ireland does not need ‘irish’ banks.

@ BrianH

I just read something there about the referendum last May. Someone representing the FDI sector was in the IT and asked the govt to stick to the fundamentals – Stay in the euro and focus on education.

Let the banks go out of business- fine for one side of the balance sheet. But the other half ?


Leaving the Euro wouldn’t fix the banks though. And it wouldn’t do much for FDI. There are no easy solutions innit.

It would be better for the non creditor states if the Euro was to have an unfortunate accident (It would be a shame if one of its larger members was to “fall out”, wouldn’t it sir?) but even if the Euro did disintegrate or split and devalue the national disaster formerly known as Anglo Irish Bank would need to be cut lose. Lettting IBRC parasitize the state will never be a good idea.

Our choice is between difficult policy options that might work and easy ones that are guaranteed not to (ie: the current Frankfurt consensus of internal devaluation, collective austerity and future public repayment of the past losses of the private financial sector by the politically less powerful states). As KO’R notes the current policies are a human disaster and an economic dead end but are also seemingly politically locked in under the current European policy making regime. We need regime change and it will not come peacefully.

Yanis Varoufakis had an appropriate quote twitter about this situation.

George Santayana on the… European Union’s policies: “Fanaticism consists in redoubling your efforts when you have forgotten your aim.”

I just do not see how Mundell’s style of monetary union can ever be made safe for the smaller partners or labour. National currencies and some kind of Bancor style of exchange rate mechanism seem to be the only way to provide room for fine grained enough national fiscal policies to manage shocks and tight enough capital controls to prevent collapsing bubbles taking the state with them.

If EMU can not be reformed then it needs to be abandoned.

more of it …

Opposition in Berlin
Cyprus Bailout Could Fail in German Parliament

The urgently needed bailout of the Cypriot banking industry is in danger of being vetoed by the German parliament. The opposition Social Democrats say they are leaning towards voting no, according to a media report. With Chancellor Merkel unable to rely on her own majority, that could be bad news for Cyprus and for the euro.


Your own INET council guff doesn’t look too impressive either, most especially the near complete absence of anything relating to unemployment.

Except of course the usual parroting of the neo-liberal ‘competitiveness’ narrative.

I suggest you apply a little test to your council’s deliberations.

Write your solutions for the Euro into a package of measures to be applied to the counties or regions of Ireland as if they were equivalent to Euro-zone countries. Constructing ‘fiscal’ borders as required. Then explain all this, how it works, its effects, how we must all strive for some super competitive ideal etc. (or suffer like Greeks, or Spanish) & put it to us in a referendum.

I would suggest that unless & until you can come up with something that would pass that referendum, you are not going to have anything that is sustainable in the Euro-zone as a whole.

From the lamentable efforts I’ve seen over the last 5 years, I don’t see anything coming from the mainstream (like your council) in the next decades, if ever, that would even get close.

To be fair, the current EU etc. political leadership exclusively of, by & for the top few percent (elites) are probably the biggest impediment.

But the intellectual bankruptcy of the mainstream economics profession, that has created the mess & all its flawed underpinnings comes a close second.

@Michael Hennigan

Yes, of course, there would be inflation. There are no pain-free options. But the upside would (hopefully) be:
– debt reduction for ordinary households;
– our PS and social benefits automatically come back to levels we can afford;
– new FDI investment;
– job growth.

As for strikes, it looks like we are going to get that anyway(Bus Éireann)!

@ SB

I wonder how much longer Plan A has.
It isn’t working. The German election is in September and we might see things changing after that. If the UK goes into that triple dip contractionary expansion may have had it.

And leaving the Euro now wouldn’t work . Did you read that IMF 8th Review paper? Ireland has so many problems to solve.

@ Joseph Ryan

The point that I was trying to make is that if the IMF is right, the “sceptics” will be vindicated and if it is wrong, they will still be in respectable company.

The difficulty that I find with Krugman is not that I think that he is incorrect on the negative impact of austerity – in all probability he is right – but that his argument is not adequately differentiated between countries. The Irish experience in the markets over the past days bears this out.

The reality is that we we have is a glide path back to solvency financed with the assistance of the troika. The related budgetary measures cannot be described as a form of generalised austerity. In fact, there is ample evidence that the burden is not being equitably shared. (There was an interesting exchange on another thread in relation to the inability of the electorate to make the logical link between taxation and expenditure. I ventured the view that this was a characteristic we shared with the Greeks because of our colonial past. In support of this, consider the use of the MPRN – Meter Point Reference Number – in both countries to track down taxable persons).

The most significant point, however, is that Ireland is an outlier in terms of economic performance relative to the Club Med countries, largely, of course, courtesy of the MNCs. This has to be factored in to any analysis e.g. such as that carried out Jorg Bibow which identifies, correctly in my view, trade imbalances, encouraged by the existence of the euro, as the main cause of the crisis. The problem is not that these exist, and given rise to claims that the banks are unwilling to finance, but that there is disagreement as to whether the debtor side should carry the entire burden or whether, within a monetary union, action has to be reciprocal.

This is the nub of the issue dividing Germany from the rest and there is no sign of it being resolved, especially as long as Merkel is in charge.

Depressions always cause mass unemployment as the mal-investment becomes obvious.

Labour organizes, carries out strikes and their share of the wealth builds up again, albeit not as easily or cleanly as the bankers and their FIRE chums.

NWO will march on, uniting the world …. using war as gently as necessary. It reduces labour excesses and amounts to a work to work scheme as property damage is inevitable. That is where the gentle part comes in. Iran and Iraq, both friends of USA, despite appearances to the contrary, sent their rebellious emo young men to meet modern weapons. The weapons won.

Reducing the ratio of male births would reduce some of these deaths.

The struggle to minimize human waste requires strong, enforced laws. This part of the NWO appears to be weak ……

It won’t be long until Noonan is telling us that long term unemployment is a ‘lifestyle choice’

All EZ countries are frantically looking around at the moment for ways to make the optics on their unemployment figures look better. Did you know e.g. that Ireland counts 16-18 yo in the ’employed’ figures but ignores them in the ‘unemployed’ figures?


Fair enough. I wonder about this though.

‘The reality is that we we have is a glide path back to solvency financed with the assistance of the troika.’

We have an adjustment process which is calibrated to repond to the various imbalances identified in 2010. It is adequate in the relatively benign climate created by Draghi’s LTRO and OMT interventions, but it’s all too easy to see the banana skins, and all too hard to see the engine of future Irish economic growth. We are

@ DOCM: ” … Meter Point Reference Number – in both countries to track down taxable persons.”

This supports shag all. Its a brazen admission of political failure to legislate that each citizen shall file an annual ‘true and fair’ statement of income … OR ELSE! – like a mandatory jail term. No hard cases or exceptions permitted. Can you see this happening anytime soon? I thought so!

“Its our hillbilly past that made us do it!”

The German model is more sustainable in the long term. The Anglo-Saxon model of credit boom and bust is clearly not sustainable and the discipline to prevent it is beyond the Irish, as we have seem. End of.

You are deficient and your major policy option is to attract FDI by staying in the EZ.

This will only last another decade or two, but the major medicine has yet to be swallowed!

Irish politicians and civil servants are well out of their depth and the economists are not much better.

I bet the idea of maintaining the banks under control will be taken more seriously now? No one can save those who wish to get rich quick. Learn and enjoy!

[…] 1) Those working in the political unions that are the United States or the United Kingdom, know combined monetary and fiscal unions can work. From this perspective, the monetary only union of the Eurozone was a largely untried experiment, and it appears to be failing. (For just one example of this view, see Acemoglu and Robinson here.) Let me rephrase that: it is failing. The perpetual crisis of the markets may be over as a result of OMT [1], but the crisis that is unemployment in the periphery just gets worse. (Kevin O’Rourke puts it bluntly but accurately here.) […]

[…] 1) Those working in the political unions that are the United States or the United Kingdom, know combined monetary and fiscal unions can work. From this perspective, the monetary only union of the Eurozone was a largely untried experiment, and it appears to be failing. (For just one example of this view, see Acemoglu and Robinson here.) Let me rephrase that: it is failing. The perpetual crisis of the markets may be over as a result of OMT [1], but the crisis that is unemployment in the periphery just gets worse. (Kevin O’Rourke puts it bluntly but accurately here.) […]

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