The 28 EU leaders care more about fiscal orthodoxy than effectively fighting youth unemployment

Iliana Ivanova (on the right), the ECA member responsible for auditing of the Youth Guarantee project and the drafting of the report entitled “Young and unemployed in Europe: obstacles ahead for the EU’s Youth Guarantee”. (ECA Audiovisual Services, Copyright: EU)

Last week the European Court of Auditors (ECA) published a report on the “risks to the successful implementation of the EU Youth Guarantee”. The ECA review, while noting that according to the Commission the available funding for this much advertised EU project is estimated at €16.7 billion for the 2014-2020 period including national resources, it also observes that as specified by the “International Labour Organization, the cost of implementing the scheme could potentially reach €21bn per annum”. (ECA, Press Release Luxembourg, 24 March 2015. The full report is available at http://www.eca.europa.eu ).

What is the Youth Guarantee?

The “Youth Guarantee” project was adopted by the European Council of the 28 EU leaders in July 2013. From the very beginning it was poorly financed with €6bn in EU resources for a seven years period (2014-2020) for a scheme aimed at making sure that within four months, all youths in the EU under the age of 25 after leaving formal education get an offer of a job, an apprenticeship or a traineeship. According to what the 28 leaders advertised at the time, the job offered had to be of “good quality” suited to their education, skills and experience. Alternatively the youth was supposed to be offered the chance to acquire the skills and experience required to find a job of “good quality” in the future through an apprenticeship, a traineeship or continued education.

The above mentioned ECA’s reference to the massive discrepancy between the available resources as designed by the EU and the potential cost for the full implementation of the project as calculated by the ILO, decries the chasm between targets and means of the entire scheme. In this way the ECA without expressly blasting this EU program, exposes the ineffectiveness of it. By the same token, the ECA in an indirect manner reveals the senselessness of the relevant decision of the 28 EU leaders.

Still without a job

According to the latest Eurostat (the EU statistical service) estimates almost 5 million youths (under the age of 25) were unemployed in the EU-28 area in June 2014, of whom over 3.3 million in the euro area. This means that the youth unemployment rate in the EU is 22% or more than one in five young EU citizens cannot find a job; in Greece and Spain it is one in two. The ECA audit estimates also that “there is a gap of nearly 50 percentage points between the Member State with the lowest rate of youth unemployment (Germany at 7.8 % in June 2014) and the one with the highest rate (Spain at 53.4 % in June 2014)”.

The scheme is co-financed by the EU and the national budgets. The public funding can be supplemented by private funds (e.g. by investments from companies in apprenticeship schemes or training schemes financed by private foundations). In April 2014 one year after implementation, the scheme was still not working. At that time the European Economic and Social Committee issued a Press release saying the “Commission and the Council … opted to link this program to a fund supporting structural measures (Structural Funds) but lost sight of the main objective – to offer a tool for emergency action”.

Caught in a Catch-22

What the EESC says here is that the project was undermined by the EU bureaucracy and the fiscal restraints in the countries which needed it most. Greece, Italy, Spain, Portugal and Ireland couldn’t develop the project, because the support from the EU Structural Funds is accorded under lengthy procedures and only if the member state spends an equal amount of money. The countries which needed the project most couldn’t spend more money on it, because they still are under a regime of strict fiscal restrictions imposed by the EU. Consequently the scheme worked only in a few member states the ones that needed it the least, like Austria and Finland.

Coming back to the ECA report, two years after the introduction of the ‘Youth Guarantee’ project, Iliana Ivanova, the Court’s member responsible for auditing it commented last week that, “We have identified as potential risks the adequacy of the scheme’s funding, the ‘good quality’ nature of the offer it proposes to young jobless people and the way in which the Commission monitors and reports on the results of the scheme. Addressing these risks early is key for the effectiveness of the Youth Guarantee.” Unfortunately it’s already rather too late to save the program, especially after ILO’s estimate that the cost of fully implementing “the scheme could potentially reach €21 billion per annum”.

No jobs, education or training for 7.5 million youths

The ‘Youth Guarantee’ scheme aims at helping some 7.5 million young Europeans in total who are not in employment, education or training. Until this very day all those people are still without a job, further education or training. The ECA auditors note that the socio-economic costs of this reality “through unemployment benefits and foregone earnings and taxes… according to EU Agency Eurofound estimates, amount to €153 billion a year – over 1 % of EU GDP”. Still the mainstream economic policies in Eurozone favor balanced or surplus government budgets which abridge EU spending, by cutting down social expenditure.

Now, almost two years after July 2013 when the 28 EU leaders introduced the ‘Youth Guarantee’ program it is pretty clear that they didn’t mean to really proclaim war against youth unemployment but rather just to be seen as doing so.