Today in Europe unemployment is becoming a very serious problem not only in debt ridden countries as Greece, Spain, Portugal and Ireland but also in the other EU countries. Unemployment is a consequence of non- or negative economic growth and that is what happens today in most of the EU countries. Even Germany, having the strongest economy in the EU, is running the risk to enter in the dangerous area of non – economic growth. The question now is how to restore economic growth in the Eurozone?
What is most needed for economic growth is money or to say it more professional capital. Capital to invest in an economic activity that will generate jobs like a textile mill or a TV set factory. But what to do when there is no capital available to invest in one or another economic activity because money is needed for the payment of debts of many Eurozone countries? Besides, because of these debts many private investors dare not to invest in those countries. How to escape from this vicious circle of debts and frightened investors?
After a lot of European political quarreling special emergency funds were created to help over indebted countries like Greece, Ireland and Portugal with extra money because the markets are closed to them because of to high interests. Private investors don't want to take the risk to loose their money in a country that is over indebted. But this emergency money only serves to keep the government going on, it is not creating jobs and production. It is dead money.
Another way out could be the devaluation of the Euro to make products on the international market cheaper which will probably give a boost to the sales of these products and so production together with jobs will go up. But in the case of the Eurozone most exports go between the Euro countries themselves so benefits from devaluation will be low. The countries that export more to the global market like Germany are at the same time the strongest economies. They don't need a lower priced Euro. May be France and Italy will benefit somewhat from a lower priced Euro but the question is how much, especially when they don' t reform the labor market like Germany.
Another possibility is that the European Central bank starts to print money. In fact this is to a certain extent already happening by buying bonds from indebted countries through the European Central Bank. But this measure is meant to maintain international confidence in the Euro not to restart the economy. For that purpose much more money should be printed with the great risk of a sky-high inflation in the near future. Some economists belief this is the only option left for the Eurozone but because of its pre Second World War experiences Germany is absolutely against it. On the other side inflation is in fact a by the state organized way of social theft hurting most the weakest people in society like the unemployed and the retired people. They are the real victims of money with lower purchasing power.
The European Trade Union Confederation beliefs that the best way for the Eurozone to get economies growing again with the aim to create employment is major steps towards a more united Europe. They propose the creation of Eurobonds guaranteed by the European Central Bank. These bonds will provide fresh money to invest in the so-called green economy (electric cars, windmills, solar energy etc.) with the aim to create new jobs. However, there are some questions to answer. Are those Eurobonds trustworthy while they are also guaranteed by some countries with still a lot of debts? Are governments capable to invest money efficient and productive in these areas or will a lot of money be lost in inefficient bureaucratic control systems or even worse go to projects which at the end have no real economic future? In that case the Eurozone has only created a new debt burden.
Another policy proposed by the European Commission and supported by for example Germany are social and economic reforms on the labor market and the social security system. This kind of reforms does not activate economies and create jobs immediately. The big issue however is that these reforms are affecting long ago acquired social rights and that is what trade unions don't like. They insist that these reforms (working longer, more flexibility on the labor market, lower and shorter unemployment payment etc.) do not work and on the contrary will create new poverty. It will also affect the internal consumer market which means another setback for the economy. On the other side without these reforms together with education, technical innovation etc. Europe will lose competitiveness on the global market and without a global market Europe will loose part of its wealth.
While the trade unions look for solutions without losing the acquired social rights and stimulating the economic growth with public money to create new jobs, the European Commission and the Nordic European countries are looking for strong reforms on the labor market combined with lowering the debt burden by increasing the retirement age, making the labor market more flexible which means lower salaries and lowering unemployment benefits in time and amount. The next months will make clear who will win the game or will there be no winners at all?