Europe’s Problems Put Another 4.5 Million Jobs at Risk

The International Labour Organization (ILO) reports that, in addition to the 3.5 million lost jobs in Europe that have not been replaced since the recession began, another 4.5 million are at risk. The region has no way to support this many unemployed people. The catastrophe resulting from this level of joblessness would trigger falling taxes and a need for increased social services, which together could ruin already fragile economies

In a new report titled “Eurozone Job Crisis: Trends and Policy Responses,” the organization lays out the problem:

If the current policy course does not change quickly, however, it is possible that a further 4.5 million jobs will be lost over the next four years. This would risk further feeding social unrest and eroding citizen’s confidence in national governments, the financial system and European institutions.

The authors of the report insist that the only way to change their forecast is aggressive stimulus and the maintenance of a one-currency system. The first of these suggestions will be nearly impossible to implement, and the second will not matter much without the first.

At the core of the ILO suggestions is a great deal of support that must be given to the growth of small businesses through credit availability. This cannot happen among the financially weakest nations without support from the strongest, which in force is really only Germany, the International Monetary Fund and European Central Bank. The ECB has already said its actions will have only modest effect, much the same as officials of the Federal Reserve have observed about the United States. German support continues to be at risk because of public opinion there, and a chance that its highest court will rule that present plans for Germany’s support of its neighbors is unconstitutional.

Spain already has discovered that it cannot meet EU goals for its budget deficit because of a drop in tax receipts triggered by 25% unemployment. The financial goal initially accepted by the European Union has been delayed a year. It is a fiction to think that the tax situation in Spain will change. The delay means nothing in so far as it would repair Spain’s economy. Greece, Portugal and even Italy face similar hurdles to one degree or another.

If the ILO forecasts are right, the next 4.5 million jobs almost certainly will be lost, because there is no coordinated program to save them. The impact will be terrible. But even with an acknowledgement of that, realistic solutions are unlikely.

Douglas A. McIntyre