Why Do Southern European countries have problems with labour markets, competitiveness and debt?
Millions of Europeans are worried about their economic future – and it’s no wonder. The continent’s economy faces a number of serious challenges, especially in southern European countries.
Countries like Greece, Spain and France lead the pack when compared to unemployment figures from northern Europe, the United States and Canada.
This is bad for 2 specific age groups:
1. Young people between 15 and 24 years old (those at the beginning of their careers)
2. Older people between 55 and 65 years old (those at the end of their careers). What’s worse is that some of these people experience long-term unemployment for structural reasons.
The labour market is a very competitive place for job-seekers. Many jobs are short-term, unfulfilling and insecure. Better paid jobs require qualifications which are strenuous to achieve and extremely costly. This is often paid for by the taxpayer.
Southern Europe has other problems, too. The introduction of monetary union (where a group of countries utilise the same currency, in this case, the Euro) in 1999 has come at a high cost.
This was meant to increase integration in the EU and speed up trade and development.
However, since 1999, salaries in the southern Europe have seemingly increased at a faster pace than productivity. This means their economies have become increasingly less competitive than they need to be in a globalised economy.
Before the introduction of the Euro, these countries could simply devalue their currencies to address this problem. For example, devaluing the Greek Pound would work to boost exports. However, this option has been off the table since they adopted the Euro. The Euro is a common currency that is controlled by the European Central Bank (ECB).
What’s more is that private and public debt has piled up during this period. With high levels of debt comes high levels of interest. This is because the debt becomes less serviceable, and risk to lenders increases. This has added even more pressure on southern European countries.
So what’s to be done? One ambitious solution is to move toward a federal European state in which risks are shared equally by all member countries.