Bad news for the 12.5 million people out of work from Sicily to Lapland -- the euro zone's hoped-for economic recovery next year is unlikely to spark job creation on a large scale.
In fact, unemployment in the 12 nations that share the single currency will fall only moderately in the next five years, to around 7.5 percent in 2008, unless governments do more to deregulate their job markets, according to the OECD.
ILLUSTRATION: MOUNTAIN PEOPLE
It was 8.9 percent in June, Eurostat data showed.
"If nothing is changed the OECD predicts the unemployment rate will average 8.25 percent over the period 2003 to 2008," said Laurence Boone, euro area economist at the Paris-based Organisation for Economic Co-operation and Development.
That compares with a projected 5.5 percent in the US.
As a result, jobless benefit payments will keep putting heavy pressure on Europe's public budgets, and the continent will stay lumbered with a built-in brake on growth.
With joblessness above four million in Germany, for example, Europe's largest economy cannot expect a consumer boom that would haul it out of almost three years of stagnation.
"Even if there is a strong upturn in growth, job creation will remain muted," said Chris Williamson, chief economist at NTC Research, which compiles the monthly Reuters purchasing managers' indices for the euro zone, a key leading indicator.
Too many hurdles
That is because it remains too costly, complicated and risky to create new jobs in Europe.
For one, companies are so skeptical about the strength of the upturn that they are not taking on new labor.
Even as leading indicators such as Germany's Ifo business climate index have started to suggest a recovery towards the end of the year, top firms are announcing major layoffs.
Industrial firm Siemens AG said last week it was shedding 2,300 jobs at its struggling mobile phones unit, of which 500 will be in Germany. Electronics group Epcos AG said it would move more jobs abroad to cut costs.
In addition to skepticism about the upturn, high labor costs continue to block recruitment. In the euro zone, taxes and contributions eat up over 40 percent of gross wages. That compares with less than 30 percent in the US.
A study by consultancy A.T. Kearney predicted that European banks will move 100,000 back office jobs abroad to low-cost countries by 2008 to counter competition and avert takeovers.
As if skepticism and high costs weren't enough, Europe's companies face stringent job protection rules, putting them off hiring workers they would have trouble firing again.
And jobless benefit is so high in a number of countries that people shun low-paid jobs.
Changes are under way in Germany, which is loosening job protection, cutting benefits and leaning harder on the unemployed to take on work.
The "Agenda 2010" package, though modest by comparison with reforms Britain implemented in the 1980s, is the right move but won't trigger recovery on its own, economists say.
No mobility
Labor mobility is another problem, reflected partly in the wide divergence in jobless rates from 3.7 percent in Luxembourg to 11.4 percent in Spain. Germany and France share second place at 9.4 percent, according to Eurostat data for June.
Language and culture are obvious barriers that may deter a French dentist from setting up shop in Helsinki. For that reason alone, mobility is unlikely ever to be as great as in the US.
But Europe's governments have done little to remove other obstacles, such as a lack of transferable pension funds and problems getting job qualifications recognized across borders.
Meanwhile even the US, lauded for its low labor costs and flexible labor market, is showing evidence of economic recovery without robust job creation.
A problem both Europe and the US face is a long-term drift of manufacturing jobs to lower cost countries such as China, with software and support jobs going to India.
"Industrial jobs are being lost to low cost producers in Asia. And those jobs are unlikely to return when the recovery begins," said Lakshman Achuthan at the New York-based Economic Cycle Research Institute (ECRI).
"China's the manufacturer and India's the back office, that seems to be the way it's shaping up."
That poses a particular risk for Germany, Italy and Spain with more than 30 percent of their workforce in industrial jobs.
Germany: the big problem
The OECD estimates the euro zone will be able to create jobs next year provided growth matches its two percent forecast.
But there are doubts about how strong the recovery will be. Achuthan said the ECRI's long leading index, which looks ahead for nine to 12 months, remains weak for Germany, which accounts for a third of euro zone output.
"The major problem that trumps everything at the moment is Germany," said Achuthan.
Germany especially is being hemmed in by what has become another European structural problem -- the EU's Stability and Growth Pact that requires countries to limit their budget deficits to below three percent of GDP.
Both Germany and France are at risk of breaching the Pact for three years running, but nevertheless remain constrained by it, curbing their ability to copy the US in spending their way out of stagnation.
"The limits are quite restrictive from the point of view of job creation," said Duncan Campbell, director of the employment strategy department at the International Labour Organisation, a UN agency that promotes labour rights and social justice.
They did it again. For the whole world to see: an image of a Taiwan flag crushed by an industrial press, and the horrifying warning that “it’s closer than you think.” All with the seal of authenticity that only a reputable international media outlet can give. The Economist turned what looks like a pastiche of a poster for a grim horror movie into a truth everyone can digest, accept, and use to support exactly the opinion China wants you to have: It is over and done, Taiwan is doomed. Four years after inaccurately naming Taiwan the most dangerous place on
Wherever one looks, the United States is ceding ground to China. From foreign aid to foreign trade, and from reorganizations to organizational guidance, the Trump administration has embarked on a stunning effort to hobble itself in grappling with what his own secretary of state calls “the most potent and dangerous near-peer adversary this nation has ever confronted.” The problems start at the Department of State. Secretary of State Marco Rubio has asserted that “it’s not normal for the world to simply have a unipolar power” and that the world has returned to multipolarity, with “multi-great powers in different parts of the
President William Lai (賴清德) recently attended an event in Taipei marking the end of World War II in Europe, emphasizing in his speech: “Using force to invade another country is an unjust act and will ultimately fail.” In just a few words, he captured the core values of the postwar international order and reminded us again: History is not just for reflection, but serves as a warning for the present. From a broad historical perspective, his statement carries weight. For centuries, international relations operated under the law of the jungle — where the strong dominated and the weak were constrained. That
On the eve of the 80th anniversary of Victory in Europe (VE) Day, Chinese Nationalist Party (KMT) Chairman Eric Chu (朱立倫) made a statement that provoked unprecedented repudiations among the European diplomats in Taipei. Chu said during a KMT Central Standing Committee meeting that what President William Lai (賴清德) has been doing to the opposition is equivalent to what Adolf Hitler did in Nazi Germany, referencing ongoing investigations into the KMT’s alleged forgery of signatures used in recall petitions against Democratic Progressive Party legislators. In response, the German Institute Taipei posted a statement to express its “deep disappointment and concern”
RSS