[ccebook.cn]The World in 2010

Europe
Europe isn't working
Nov 13th 2009
Governments will be tempted by the wrong policies to tackle unemployment
A spectre will haunt Europe in 2010: not communism, but the return of mass unemployment. The European
economies will recover slowly during the year. But unemployment is a notoriously lagging indicator. The OECD,
a think-tank of rich countries, expects it to reach a post-1945 high of 10%, or some 57m people, for the
whole OECD club in late 2010; by then some 25m jobs will have been lost since 2007. In several countries—
Spain, Ireland, France, Germany and Poland—the rate will rise above 10%.
The last time that joblessness was a big scourge in Europe was in the early 1990s. But the boom of the past
15 years helped to reduce it, even in countries like France, Germany and Spain where it had seemed
entrenched. Falling unemployment made it easier for some countries to loosen the regulations that gummed
up their labour markets, helping to push the jobless numbers down further as well as making economies more
competitive.
This virtuous cycle will go into reverse in 2010. Rising unemployment will make it far harder to push through
labour-market reforms. It will make it politically impossible to scrap or blur the divide that exists in many
countries between protected “insiders” on permanent contracts and unprotected “outsiders” stuck with
temporary ones. This means that the first and biggest sufferers from rising joblessness will be outsiders, a
group disproportionately made up of the young, women and people from ethnic minorities.
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