Unemployment could rise to almost 22 million in the 17-nation eurozone over the next four years unless European nations provide more help for small firms and the millions of youth struggling to find work, the UN labor office said yesterday.
The International Labour Organization (ILO) said in a new report that a focus on job creation could avert the loss of another 4.5 million jobs on top of the current 17.4 million unemployed. However, the Geneva-based organization concluded it would require a quick, major policy shift “out of the austerity trap” by all the 17 countries that use the joint euro currency.
The sustainability of the European monetary union has been called into question by high government debt, high borrowing costs and tough negotiations over bailouts and spending cuts.
A raging debate has erupted this spring over whether austerity measures mandated by the EU and its single biggest economy, Germany, are doing more harm than good by stunting growth in some of the indebted eurozone nations. France’s election of Socialist Francoise Hollande as president in May was seen as a rejection of austerity policies.
ILO Director-General Juan Somavia said the eurozone is undergoing its worst jobs crisis since the creation of a single currency in 1999. With the rate of youth unemployment exceeding 50 percent in some countries, he said, any worsening of the situation would add to social unrest and further erode confidence in financial systems and governments.
“The report shows that by embracing a eurozone growth strategy with jobs at its core, the recovery is still possible” without any breakup in the currency union, he said. “But the window of opportunity is closing.”
The ILO’s prescription for recovery focused on repairs to financial systems, such as boosting banks’ solvency, making credit easier to obtain for small enterprises and putting in more youth training and school-to-work programs, such as those in wealthy nations like Austria and the Netherlands.
The ILO said one of the biggest challenges for the eurozone remains its focus on traditional policies that Somavia predicted would only exacerbate the widespread problem of not enough jobs.