Eurozone Unemployment Rate
Eurozone also known as the euro area is an incredible economic and monetary union [EMU] of 18 European Union member states that use euro as their common currency. Business has not been that smooth within the euro area. Majority of the countries with the area have experienced the pain of facing the euro crisis. Rising unemployment rate is one of the core problems facing most of the countries. Most of the 18 countries within the euro area have been facing ruthless rise in youth unemployment for many years.
The European Union has experienced very low rates of unemployment until the 1970s. It then rose and remained unyielding until mid-1990s, but the situation has not changed in 2000s. The 2008 to 2012 recession has pushed unemployment rate to shoot up to 10% and it shows no signs of falling in most of the countries within the Euro area. Actually, in some parts of the Eurozone, unemployment rate has exceeded the estimated 20%.
At this rate millions of youths have no jobs and many struggle to meet their day to day needs. Finding measures to mitigate this global pandemic has become a mainstay undertaking in every country within the euro area. In fact, in most of the nations like Spain and Greece who have unemployment rates of over 25%, instant solutions are needed. There are numerous causes of increased Eurozone unemployment that have been picked out and they include;
- Reaction of the European Central Bank- the ECB has a reputation of keeping inflation low and this means that the bank is willing to do anything to keep inflation low. This means even if every nation has to sacrifice growth and investment to sustain low inflation. ECB has gone against most of the banks in the world.
- Rigidities in the Euro- Euro is the single currency used within the Euro area. It has made it hard for most of the countries to cut interest rates, devalue currency and enhance competition or pursue any quantitative easing. A new monetary pact on euro that places limit on fiscal policy has brought in the hard-hitting rigidity in the Euro. Hence, there are fewer opportunities to pursue or foresee higher economic growth.
- Overrated exchange rate- Some of the countries within the Eurozone such as Portugal, Spain and Greece have experienced falling competitiveness traits. For instance, in a single currency economy, they have found it hard to degrade and this has pushed exports less economical, thus lower export demand.
- Cyclical unemployment- Since the start of 2008 recession, there have been a sharp rise in unemployment and the impact of decreasing job opportunities has been experienced in the zone.
- Lack of incentives- Every country within the Eurozone is protected from a currency crisis and this means there is less incentives for countries to apply structural reforms or undertake any monetary responsibilities.
Majority of the nations within the Eurozone blame labor market rigidity and generous welfare benefits on increased unemployment rate among other factors. But this is not the simplest answer. These nations need to come up with exceptional growth strategies that require action on various fronts. Policies that support demand and supply are need in short-term. An effective banking union needs to be established and put into action immediately. Stability mechanism should also be established to rescue the suffering youths and much more.
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