After four years of austerity, with drastic government spending cuts and higher taxes, the euro zone countries should have been on a path back to prosperity by now.
That is, if austerity had been the right medicine.
It was not, though, and there is ample evidence to prove that, both empirically and analytically. Today we can add even more evidence to the pile: in the lastest study of unemployment, Eurostat reports that the euro-zone countries that have taken the hardest austerity beating exhibit the highest unemployment numbers. This is logical to anyone properly trained in economics, and it appeals to common sense. However, Europe’s political elite is apparently as baffled as your average Austrian economist. Euractiv reports:
Employment and Social Affairs Commissioner László Andor called new unemployment rates released by Eurostat yesterday (2 April) “unacceptable” and “a tragedy for Europe”. The eurozone has hit the 12% mark for job-seekers, compared to 7.7% in the USA.
The main reason why the United States does not have a higher unemployment rate is that we have yet to subject ourselves to fiscal torture, a.k.a., austerity. That said, unless Congress does something before the end of this year we are going to face a significant increase in taxes as Obamacare goes into full effect. That will undoubtedly cost us the fledgling recovery we are in now.
Back to Euractiv, which reports that the 12-percent level of unemployment in the euro zone is up from 10.9 percent a year ago:
In total, the number of job-seekers in February jumped to 19,071 million, almost two million more that the previous year. For the EU 27, the total number of unemployed stood at 26,338 million, more that two million more that in 2012. … “Such unacceptably high levels of unemployment are a tragedy for Europe and a signal of how serious a crisis some eurozone countries are now in. The EU and its member states have to mobilize all available instruments to create jobs and return to sustainable growth,” said Employment and Social Affairs Commissioner László Andor, as quoted by spokesperson Chantal Hugues.
This is typical hot air coming from a representative of the bureaucracy that has forced country after country into the dungeons of austerity. Greece has lost a quarter of its GDP in four years under the EU’s boots of an unforgiving combination of spending cuts and tax increases. Portugal has been brought to the brink of social unrest by similar policies, and some provinces in Spain are moving toward secession – again a result of reckless fiscal policies.
Now the same commission that authorized – not to say ordered – the jobs-destroying policies is demanding – and presumably soon ordering – more jobs to be created.
On one topic, though, the commissioner’s empty words do have a bit of substance. Euractiv again:
“Young people need more support to acquire the right skills to increase their chances of getting a job and finding vacancies that exist. This is why the Youth guarantee, agreed by EU ministers on 28 of February, must be put in place urgently,” Hugues added.
While a “youth guarantee” won’t create any jobs, the concern for the young is at least a sign that there is some sort of contact with reality in the Eurotarian hallways. Perhaps the good commissioner and his colleagues have seen enough of the surge in activity by the Nazis in Greece to realize what is about to happen in Europe?
The concern for the consequences of high youth unemployment is also reflected in an article in The EU Observer:
Unemployment among the under-25s is particularly high. More than one in two young people are without work in Greece (58.4%) and Spain (55.7%). In Portugal, it is 38.2 percent and in Italy 37.8 percent.
Europe is turning into an economic wasteland, right before our eyes. Years of increasingly invasive regulations and taxes, combined with a work-discouraging welfare state, laid the groundwork for economic stagnation. Then, as the Great Recession came sweeping across the world, deficits opened up in the government budgets of Europe’s over-bloated welfare states. In response, ill-informed and arrogant members of Europe’s authoritarian political elite – the Eurotarians for short – began demanding destructive austerity policies in return for deficit-funding grants and other forms of short-sighted support.
The price for this colossal economic mismanagement of an entire continent is now being paid by the young. The EU Observer again:
The high unemployment rates, particularly among the youth, have led politicians to increasingly speak of a “lost generation” with little prospect of finding work. “We are in a double dip recession. Unemployment is up, up and up. When is growth going to come?,” Bernadette Segol, the head of the European Trade Union Confederation asked recently.
A glimmer of hope, though:
She suggested the persistent focus on austerity measures is leading to “doubts” about the benefits of belonging to the European Union. The eurozone’s growth prospects also compare badly with other regions. While the 17-nation currency area economy is expected to contract by a further 0.3 percent this year, the US economy is expected to grow 1.7 percent in 2013. China’s GDP is growing at about 8 percent a year.
I would not take the Chinese number very seriously. There is still a lot of political inflation in growth numbers coming out of that country. The ruling communist party demands regional leaders to “produce” certain levels of growth year after year. If the regions don’t deliver, their leaders are punished. Therefore, in order to keep their jobs and remain in good standing with the rulers in Beijing, many regions simply report the growth rates that the commycrats want.
That said, the Chinese economy would only have to grow at two percent per year to do better than the European economy – in itself a fact that speaks volumes to the complete and utter disaster that is unfolding in the Old World.
And worst of it all is that it is entirely politically generated. A Godzilla-size government filled with over-paid, politically arrogant bureaucrats listened to Austrian economists who suggested that austerity was the way forward. From the deliberate destruction of economic activity would, the Austrians said, rise a phoenix of prosperity and jobs.
Of course, that would all happen in the long run.
Europe’s young are waiting to learn just how long that run is going to be.