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Europe: Next Step

France and Germany joined hands to confront a jobs crisis


Unemployment among young people is a critical problem in many countries in the eurozone, particularly those enacting draconian reforms to restructure their economies and reduce debt. In some of these countries the unemployment rate among young people exceeds 50%.

France and Germany” agree that an action plan has to be implemented to combat high unemployment, adding that it must be done on a war-footing.

French Labour Minister Michel Sapin said the blueprint – dubbed the New Deal by the media in reference to US president Franklin D Roosevelt’s Great Depression recovery plan – would target small- and medium-sized businesses to create jobs.

“It is the small and medium businesses that create the most jobs for youth, it is them we have to support,” Sapin said, promising that a “concrete and very strong initiative” would be unveiled during a European meeting on June 28.

The German minister said: “Many small and medium businesses, which are the backbone of our economies, are ready to raise production, but they need capital. They can only access it at exorbitant rates. It’s a vicious circle.”

The two countries’ labour and finance ministers attended the “Europe: Next Step” conference at Sciences Po, before meeting with Hollande. Spanish Prime Minister Mariano Rajoy was also to meet later with Hollande. In Spain, every second young person is unemployed.

Hollande and German Chancellor Angela Merkel have taken divergent stands on tackling the crisis.The French leader has urged less austerity while Merkel is pushing for cutting debt and reform of labour markets to create employment.

Hollande, who is under pressure to reform his recession-hit economy, is also facing the heat from the left-wing of his Socialist Party, which is strongly critical of Germany’s influence on economic policy in the European Union, and indirectly on France.

German Finance Minister Wolfgang Schaeuble also warned that failure to win the battle against youth unemployment could tear Europe apart, while abandoning the continent’s welfare model in favour of tougher US standards would cause “revolution”.

“We need to be more successful in our fight against youth unemployment, otherwise we will lose the battle for Europe’s unity,” Schaeuble said.

While Germany insists on the importance of budget consolidation, Schaeuble spoke of the need to preserve Europe’s welfare model.

If US welfare standards were introduced in Europe, “we would have revolution, not tomorrow, but on the very same day”, Schaeuble told a conference in Paris.

We have to rescue an entire generation of young people who are scared. We have the best-educated generation and we are putting them on hold. This is not acceptable,” Italian Labour Minister Enrico Giovannini said.

Germany in particular, weary of a backlash as many in crisis-hit European countries blame it for austerity, has over the past weeks taken steps to tackle unemployment, striking bilateral deals with Spain and Portugal.

German ministers told the conference that, to help young people find jobs, Europe must continue on the path of structural reforms to boost its competitiveness as well as make good use of available EU funds, including 6bn euros that leaders have set aside for youth employment for 2014-20.

While all agreed on the urgency needed to tackle youth unemployment, ministers offered no concrete plans, insisting Europe must be pragmatic and work on various strands.

Schaeuble said this was why Germany had also decided to strike deals with countries such as Spain and Greece.

The European Commission said this month in a forecast that the euro-area economy will likely shrink for a second year while unemployment will rise to a record 12.2%.

The Eurostat report late in April said that a total of 5.6mn people aged under 25 were registered as unemployed in the 27-member European Union in March, of whom 3.5mn were from the eurozone.

Germany has the lowest rate of youth unemployment in the European Union, with only 8% of the working population aged between 15 and 24 without work. In France the figure is 24%, while it is more than 55% in Greece and Spain.

Source: Reuters

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