Job fears pressure European governments to act
By Estelle Shirbon
Fri Oct 24, 2008 9:12am BST
PARIS (Reuters) – European governments are facing calls for action to prevent a sharp rise in unemployment in the worst economic upheaval since the 1930s Great Depression.
The International Labour Organisation has forecast 20 million jobs worldwide will disappear by the end of next year, and economists expect job queues to lengthen across Europe.
Companies facing a sharp downturn in activity have already announced thousands of job cuts. The inevitable question from workers to governments is: “You found billions of euros for the banks, what are you doing now to protect jobs?”
The answers range from fiscal incentives for new investments, as in France, to making it harder for foreign workers to enter the country, as in Spain. But there has been nothing huge and coordinated across borders like the banking rescue plans.
Some economists think that is just as well, warning that governments should be wary of rolling out costly stimulus packages when many countries already have solid safety nets inherited from the fight against past recessions.
“Most countries' unemployment policies are more advanced now, not only benefits but also training and measures to help people find work in tough times,” said Stefano Scarpetta of the Organisation for Economic Cooperation and Development OECD.L.
He also said the crisis had hit at a “relatively favourable” time, with low unemployment rates in many European countries.
Analysts also say states would be unwise to rush into new spending when they are already saddled with budget deficits and they face a rise in welfare spending as people lose jobs.
However, such caution will not go down well with people worried about their future.
In Germany, Europe's biggest economy, the ruling parties fear voters will punish them in next year's federal election if the unemployment rate begins to rise again after hitting a 16-year low of 7.6 percent in September.
“We have to do all we can to try and lift the economic growth rates through various incentives,” Chancellor Angela Merkel said on Monday. But there is disagreement in the ruling conservative-social democrat coalition about exactly what to do.
Ministries are working on ideas targeted at vulnerable sectors like the auto and construction industries, and are expected to present concrete plans within a couple of weeks.
In France, unemployment stood at 7.2 percent in the second quarter and is expected to rise to 8.5 percent by the end of next year according to a Reuters survey of economists' views.
The government has responded by redirecting 22 billion euros of savings held by banks towards loans for small businesses and halting corporate tax on new company investments.
France has already experienced protests staged by workers over job cuts, notably at carmaker Renault which said last month it would scrap 4,900 French jobs. President Nicolas Sarkozy, who was heckled by Renault workers at the worst-affected plant, could face pressures from the street in a protest-prone country.
In Spain, the end of a decade-long construction boom pushed unemployment up by 30 percent in a year to 2.6 million jobseekers in September, the highest since 1997.
At 11.3 percent, Spain's jobless rate is the highest in the eurozone and some analysts think it could hit 19 percent next year as the global crisis compounds domestic problems.
The government has responded to the threat with a fiscal stimulus programme worth 38 billion euros until 2012.
Spain has also radically tightened its immigration policy, one of the most liberal in Europe in recent years with 1 million arrivals in 2007. Now Madrid wants to close the gates.
It says it will pay unemployed foreigners to go home, but this much-publicised measure does not seem to be finding many takers. Many migrant workers have lost construction jobs but there is no evidence of significant numbers going home.
In Britain too, a link has been drawn between rising unemployment and immigration policies.
“If people are being made unemployed, the question of immigration becomes extremely thorny … It's been too easy to get into this country in the past and it's going to get harder,” Immigration Minister Phil Woolas told The Times newspaper.
Britain has benefited from a huge influx of European migrants from new EU members over the past four years but there are signs that many are heading home as the crisis bites.
FACTBOX-Europeans fear for their jobs