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Sunday, 29 September 2013

How the credit crisis became a youth unemployment crisis in the European Union… but not in every country. Which countries became the “winners” of the credit crisis?

If you want to see how big the impact of the credit crisis in the European Union has been, you just have to take a look at the average youth unemployment. From the European bureau of statistics Eurostat, I took the average youth unemployment data between December 2007 until July 2013.

Especially between September 2008 and April 2010, there has been a surge in youth unemployment (see the chart).

Average youth unemployment in the EU between 2007 - 2013
Data courtesy of Eurostat.
Chart by:
Click to enlarge
In the remainder of 2010, youth unemployment initially decreased a bit when the economy seemed to pick up again in Europe, as the initial credit crisis seemed to be over. However, at the end of that year the euro-crisis was already looming, which came to an outburst in 2011 and beyond. This Euro-crisis caused the European youth unemployment to rise further, albeit at a much slower pace.

If you want to see what the impact has been of the credit crisis (inclusive the Euro-crisis) on youth unemployment, look at this data table and especially this gruesome chart:

Rise in youth unemployment per
country between 2007 - 2013
Data courtesy of Eurostat.
Click to enlarge

Top 5 biggest rise in youth unemployment between 2007 - 2013
Data courtesy of Eurostat.
Chart by:
Click to enlarge
Strangely enough, as you can see, not all countries became a victim of the soaring youth unemployment. Some countries managed to keep their youth unemployment quite stable during the credit crisis and two countries even diminished their youth unemployment:

Top 5 smallest rise in youth unemployment between 2007 - 2013
Data courtesy of Eurostat.
Chart by:
Click to enlarge
Unfortunately, I can’t tell you much about the situation on Malta, as this country has always been far from the economic spotlights.

However, Austria and especially Germany have profited strongly from the diminished competitiveness of the PIIGS countries, while especially the German export machine operated at full speed during the last three years of the crisis.

Since the beginning of this century, Germany went through an enormous wage restraint program which has been the basis of the German success during the last five years.

Austria, with an economy which is mainly based on small-scale, labour-intensive Small and Medium Enterprise (SME) industries, seemed almost untouchable for the economic crisis: the country has the lowest unemployment of the whole EU and arguably the most stable economy and industries.

On top of that, the exposure of these two countries to the misery in the PIIGS countries had been relatively limited, in contrary to f.i. The Netherlands, whose export has traditionally been very dependent on the European Union and especially the southern European countries. Together with Malta, Germany and Austria seem to be the relative ‘winners’ of the credit crisis.

You could argue that the youth unemployment also rose very limitedly in Sweden and Finland, but with a youth unemployment of already 16% (Finland) and 19% (Sweden) in December 2007, this is hardly a comforting achievement.

What was partly surprising for me is that the youth unemployment effects of the Euro-crisis (roughly from the beginning of 2011 until the end of 2012) are actually quite small, in comparison to the effects which were caused by the official start of the credit crisis (September 2009, when Lehman Brothers collapsed).

The reason can be seen in the following table, which shows the change rate between January 2011 and July 2013:

Rise in youth unemployment per country
 since the start of the Euro-crisis
Data courtesy of Eurostat.
Click to enlarge
While some countries (a.o. the PIIGS ( minus Ireland), Croatia and Slovenia) saw their youth unemployment further explode during the Euro-crisis, in some other countries youth unemployment actually decreased strongly during this period: especially the Baltic States. Under pressure from their EU membership, these countries worked very hard and took very painful, but successful measures to increase their economies, with spectacular results.

This improved unemployment situation worked as a counterweight for the soaring unemployment in the PIIGS, Croatia and Slovenia.

What all these tables make perfectly clear, however, is that the European youth unemployment is still not under control at all.

The Euro-crisis has now been declared over unofficially and there seem to emerge some ‘green shoots’ in Spain, Greece and other countries. Nevertheless, to take away the outrageous youth unemployment in the PIIGS countries and the former East-European countries, still a miracle should happen.

I am very afraid that this miracle won’t come from the European Union: renewed German Chancellor Angela Merkel and her henchmen from The Netherlands, Great Britain and Finland will keep their hands firmly on their European wallets and still want to solve the euro-crisis with austerity and more austerity.

The 3% from the Stability and Growth Pact is yet holy and further it seems to suffice to ‘kick the can further down the road’, instead of making some fundamental adjustments in the (South and East) European economies. The South- and East-European youth will remain the victims of this mindless policy.

That is not an opinion, but a crystal clear, inevitable outcome from the European unemployment data.

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