Job creation ambitions hit by eurozone woes

Commission to publish ideas on how to trigger ‘job-rich growth’ amid gloomy eurozone concerns.

The European Commission will next week launch a bid to balance austerity measures and deficit-reduction with job-creation and growth, but will do so in the face of renewed disquiet on the financial markets about the eurozone’s prospects.The Commission is on Wednesday (18 April) to publish  its ideas on how to trigger a “job-rich recovery” across the European Union. But the context could hardly be gloomier, with the eurozone last week registering unemployment rates at a record high. Bond yields rose this week as the markets took fright at bad economic news, with Spain the main focus of concern.
The Commission has given Spain until the end of this month to present a comprehensive budget laying out how it will reduce its large deficit. Spain published its 2012 budget on 30 March but the Commission, which under revised rules for economic governance has to scrutinise the plan, said that it had not yet gained a full picture.
A Commission spokesman said that it had “a positive view” of Spain’s provisional budget, but this was incomplete because it did not include details of the commitments to be made by Spain’s regional governments.
Spain is trying to bring its budget deficit down from 8.5% of gross domestic product last year, to 5.3% this year and 3% in 2013, as agreed with eurozone finance ministers on 12 March.

On Monday (9 April) Mariano Rajoy, Spain’s prime minister, made an unexpected announcement that his government would be making a further €10 billion of cuts to health and education spending on top of the cuts already included in the budget.

Some economic analysts and investors believe that the targets for deficit reduction are too ambitious and that the country may be forced to follow Greece, Ireland and Portugal in seeking an international bail-out. This week Spain’s borrowing costs – a significant indicator of investor confidence – hit their highest levels since December.

Both the Commission and Spain’s government this week denied that Spain would need a bail-out, but in a sign that tensions are resurfacing, the eurozone’s 17 finance ministers are expected to hold an impromptu telephone conference before their next scheduled meeting on 14 May.

Relations between Spain and Italy appear increasingly acrimonious. Speaking in Spain’s parliament yesterday (11 April), Rajoy issued thinly veiled criticism of Mario Monti, the prime minister of Italy, who on Tuesday implied that Spain’s government was to blame for the latest flare-up of the debt crisis.

Rajoy said that he wanted to address “some statements which have been made in the EU, and more explicitly last night by some EU leaders”.
“We hope that they assume their responsibilities and are more cautious in their statements,” he said. “What is good for Spain is good for the eurozone.”

Spain has the highest unemployment rate in the eurozone, 23.6%, according to figures published on 4 April.  The jobless rate among those aged 18-24 is the highest in the eurozone, at 50.5%.

The latest unemployment figures also showed that the proportion of people out of work in the eurozone as a whole is, at 10.8%,  the highest rate since the single currency was introduced.

László Andor, the European commissioner for employment, social affairs and inclusion – and for some time the Commission’s most vocal proponent of a growth agenda – is preparing the Commission’s programme for a ‘job-rich recovery’, to be published next week.

The proposals are still being finalised but will emphasise the need to create “demand” for new jobs and are likely to include proposals related to minimum wage levels, labour costs and movement of workers.

In two staff working documents, the Commission will set out the benefits of exploiting the employment potential of ICT, the healthcare sector and green jobs.

His ideas may put him at odds with national governments by suggesting that there should be convergence of employment policies across the EU.

The political climate for the Commission appears just as difficult as the economic context. Greece’s caretaker government announced yesterday that elections will be held on 6 May. Political parties opposed to the austerity conditions imposed by the country’s international lenders are expected to make large gains.
On the same day, France will hold the second round of its presidential election. François Hollande, the Socialist candidate, who has pledged to renegotiate the intergovernmental treaty on fiscal discipline, is forecast to win.