A sterilised EMU may lead to a break up of Eurozone

Ahead of the ‘The European Employment Forum’ which takes place in Brussels today and tomorrow and according to its organisers is ‘the annual networking forum for everyone involved in employment and enterprise within the EU and beyond’, there was an increased activity over the burning issue of jobs and unemployment in Europe. To this effect, the Lithuanian Presidency held a meeting of Chairpersons of Social Affairs and Labour Committees of various European parliaments in Vilnius. The target was to discuss the implementation of the Europe 2020 Strategy. Keynote speaker in this Vilnius conference was László Andor, the European Commissioner responsible for Employment, Social Affairs and Inclusion. He delivered a long speech describing the problem and reviewing the relevant employment policies. Despite the fact that his analysis of the appalling reality was almost perfect, when it came to the remedies he only had the Youth Guarantee initiative to present, as a specific measure that would be used to ensure opportunities for young people under 25 to receive job offers. Guarantee for whom? Under this Youth Guarantee Scheme, the 28 EU leaders during their Summit of 28 June have committed to ensure that within four months of becoming unemployed or leaving formal education, “all young people up to the age of 25 receive a high-quality offer of a job, an apprenticeship or a traineeship”. Currently, 23.5% of Europeans under the age of 25 (approximately 7.5 million) across the EU are out of work. Andor failed though, to say that the European Economic and Social Committee recently revealed that four months after the announcement of this Youth Guarantee and none of the 7.5 million unemployed youths under 25 in the EU 28 countries has yet received any offer of a job, an apprenticeship or a traineeship. In view of that, the EESC warned that the Member States have still not proposed anything specific and that there is a great risk this whole affair remains “a merely declaratory policy”. Can Eurozone hold? As noted above, despite Andor’s inability to offer any tangible prospect to the unemployed in the form of effective policies, while analysing the problem he reached the heart. What he said yesterday in Vilnius is an inspired analysis of the current conjuncture in the Eurozone. He stressed that, “a sustainable recovery can only come if the strategy includes major steps towards a new model of the monetary union. Unfortunately, in today’s European Monetary Union with a Fiscal Compact but without trans-national fiscal transfers, the fiscal policy framework works pro-cyclically and does not facilitate adjustment to asymmetric shocks. The only remaining adjustment mechanisms are loss of population through emigration, and internal devaluation, with all its adverse effects on aggregate demand, human capital and social cohesion. If these existing ways to restore competitiveness prove more painful than currency devaluation, we cannot assume that the commitment to the single currency can last forever”. What László said there is in the mind of every Greek, Italian, Spanish and Portuguese wage earner. True, those countries are not ready to accept whatever economic, social and political cost in order to remain in the euro area. The next European elections will probably prove that. One cannot imagine how many extremists and harlequins will be elected in the next European Parliament. The rare deniers of the European project, currently elected in the EU Parliament, will look like college boys compared to those who are coming. The Commission and the Council would have a very big problem cooperating with them. The quality of the political life in the worst hit countries is deteriorating fast. What happens in the Parliaments of Italy and Greece was unthinkable some years ago. Last week, the Greek government in Parliament faced a no confidence motion by the major opposition. The language and the arguments used by both sides were reminiscent of the worst moments in Greek history. Euro elections will show the problem The closer the May 2014 European elections come, the louder will be the toll of the danger bells sounding the alarm in Berlin and Paris. Unfortunately, the problem is that it may already be too late for the Eurozone to change course. If the Germans go on arguing in support of a sterile European Monetary Union, without strong pillars of fiscal transnational transfers and a partial mutualisation of the financial obligations, the days, months, probably years of the Eurozone are numbered.