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By Dr. Jim Leontiades
Cyprus International Institute of Management
It is now some 17 years since a group of countries came together to establish a common currency, the Euro. For the first years of its existence, the Eurozone group of countries had considerable success. The group eventually implemented a series of institutional and regulatory measures which went far beyond the aim of a common currency. These included far reaching measures aimed at improving the economic life and political cohesiveness of the group. The so called “more Europe”.
However, with the financial crisis of 2008 and more particularly the Greek sovereign debt crisis of 2012, there has been a marked deterioration. The Eurozone has been hampered by both slow economic growth and more recently with growing political disarray. Its lack of success is most obvious in finding employment for its residents.
Unemployment
The most important economic objective for any country is providing full employment to its citizens. Failure on this issue is not just an economic problem. It has social repercussions in terms of lives wasted, families destroyed and careers lost. It is also here that the Euro group of countries have experienced their most conspicuous failure. Germany, with an unemployment rate of only 4.5%, is doing well but it is a notable exception. Despite the many well-spun optimistic news releases from the Eurozone public relations office, the success of the single currency group in the area of jobs and employment has been noticeably lacking. Over 17 million people were unemployed in the Eurozone in 2015.
Assessing success or failure implies a comparison. Firstly to be considered is the current level of employment performance of the Eurozone relative to its peer group of other developed nations. Secondly, its performance can be judged historically, comparing it over a period of time.
Unemployment Relative to other Developed Countries
The most recent employment data for the major developed countries (see Table) shows Eurozone unemployment relative to its peers.
National Rates of Unemployment
USA 5.0%
UK 5.2%
Japan 3.1%
Canada 7.0%
Australia 5.8%
Eurozone 10.7%
The Eurozone clearly underperforms by this measure. The next closest in unemployment is Canada, recently hit by the drop in demand for its oil and other commodities. If the Eurozone could match the unemployment rate of Canada, the least successful of its peers, it would require finding new jobs for over 5 million more of its residents, a distant prospect.
Performance Since the Financial Crisis
The early years of the Eurozone saw a rapid improvement in employment. Beginning with an unsatisfactory rate of unemployment of 9%-plus, unemployment in the zone declined. By 2008, the first year of the financial crisis, it stood at 7.6%. Since then, the rate of unemployment in the Eurozone increased steadily for five years, hitting a peak of 12% in 2013, falling slowly for the next two years to its current level of 10.7% .
By comparison, the US entered the financial crisis in 2008 with an unemployment rate of 5%. In the following two years, this peaked in 2010 at 10%, declining steadily for the subsequent five years to its current 5%, essentially where it began before the financial crisis. Britain closely paralleled the US experience. Beginning in 2008 at 5.6%, unemployment peaked in 2011 at 8.1%. It subsequently declined and is now back to the British pre-crisis level of at 5.5%
Current unemployment in the Eurozone has yet to reach the level it had before the 2008 crisis. At 10.7% the Eurozone is still at a level unemployment consistent with economic recession. Included in that number is a current youth unemployment rate (2015) of 23%. For Spain and Greece, it remains close to 50%. This is despite the numerous “make work schemes” sponsored by Eurozone governments anxious to reduce unemployment along with record levels of migration to other countries by persons seeking work.
Eurozone performance during the financial crisis compares unfavourably even against other EU countries which are not members of the common currency. Official EU statistics (Eurostat) state that after 2008 “unemployment declined more rapidly in the member states which do not yet have the Euro”.
Whatever else may be said about the efforts of the numerous crisis meetings of the Eurozone authorities to address the economic problems of Greece and other member countries , they have failed to provide a satisfactory solution for Eurozone unemployment.
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