- Published on Wednesday, 11 July 2012 08:00
- Written by RTT News
Eurozone faces the risk of losing a further 4.5 million jobs over the next four years if the policymakers does not change the current course of action, the International Labour Organization (ILO) warned Wednesday.
In a report, the ILO's International Institute for Labour Studies said a concerted policy shift towards job creation is needed to reverse the heavy unemployment crisis affecting the single-currency area. Total employment in the currency bloc remains 3.5 million lower than before the crisis, it noted.
Unemployment in the Eurozone could reach almost 22 million over the next four years, up from 17.4 million. All countries in the Eurozone will suffer without a shift in policy direction, it cautioned.
"It's not only the Eurozone that's in trouble, the entire global economy is at risk of contagion," ILO Director-General Juan Somavia said.
"Unless targeted measures are taken to increase real economy investments, the economic crisis will deepen and the employment recovery will never take off."
The ILO report noted that all evidence points to the risk of "a prolonged labor market recession" threatening the sustainability of the single currency. The jobs situation is feeding social unrest and eroding confidence in banks and the financial system, national governments and European institutions.
The report questioned the primacy of focusing narrowly on fiscal austerity without necessary measures to support economic growth. Austerity will affect employment, while also failing to cut fiscal deficits significantly, ILO observed.
The study pointed out that economies with a more growth-oriented policy strategy show better performance in terms of jobs, investment and financial stability.
The consequences of a lengthier labour market recession would be particularly dire in the short term for young jobseekers, the report warned.
A similar concern was expressed by the Organization for Economic Co-operation and Development (OECD) on Tuesday. In its annual Employment Outlook 2012, the Paris-based think tank said the young are at most risk of long-term damage to their careers and livelihoods.
OECD said euro area unemployment rose further in May to an all-time peak of 11.1 percent. The OECD-wide jobless rate is forecast to remain high at 7.7 percent in the fourth quarter of 2013. This would leave around 48 million people out of work across the OECD nations.
In April, the youth unemployment rate in the Eurozone was over 22 percent, ILO said. It exceeded 30 percent in Italy, Portugal and Slovakia and was over 50 percent in Greece and Spain. Youth unemployment rates also remained relatively high in successfully performing countries, such as Belgium and Malta.
The ILO report put forward a number of proposals to move out of the austerity trap. These included repairing the financial system conditional on resuming credit to small firms, making shareholders pay for the bailouts and promoting investment.
Implementation of a "youth guarantee", at a cost estimated at less than 0.5 percent of the Eurozone's government spending and measures to address the differences in competitiveness between Eurozone countries were also among the recommendations.
by RTT Staff Writer