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Finding the Balance Between Austerity and Employment

Finding the balance between implementing austerity measures and supporting employment is a tough challenge that many European countries are facing. With fiscal consolidation policies in such different economies as the United Kingdom and Spain, the next challenge will be for them to find ways to juggle with the two key policies.


"Austerity does not necessarily mean hardship," Chris Grayling, the UK employment minister, told CNBC at the G20 Labour and Employment Ministers Meeting (LEMM) in Paris on Tuesday, explaining that the government's austerity policy "should not be at the expenses of the poorest in society."

No matter how tough the fiscal situation, human capital has to be preserved, Angel Gurria, secretary general of the Organization for Economic Cooperation and Development (OECD), told CNBC at the same meeting, before pointing at the example from the US.

"America showed a great example," he said, "because they have a tight budget, but still offer 3 percent of their GDP to create jobs… Let's deal with today, without losing medium and long-term considerations."

Grayling explained how events such as the G20 labour and employment ministers meeting were great platforms to exchange ideas to try to resolve the question of finding a balance between an austerity policy and encouraging the labor market.

"It is particularly important to see what other G20 members are doing," he said, "each country has ideas that they put in place."

For example, Grayling said he observed that due to the financial crisis, "it is more difficult to get funding for small enterprises," hence the need to create new allowance to help self-employed entrepreneurs.

"Unemployment is the human face of the crisis," Gurria said, explaining how after focusing so much on the financial side of the crisis, eyes are now turning towards two new phenomena: long-term and youth unemployment .

Spain may be the most urgent example of the need to tackle the issue of youth unemployment. With unemployment figures among the young population topping 40 percent in Spain, the country has experienced a social uproar in the form of the indignados protest movement, which later spread all around Europe.

Youth unemployment has doubled, tripled, and even sometimes quadrupled, Gurria said, all over the world… we have encouraged students not to drop out for years, and now, they have high skills, but no jobs, he explained.

"We need to restore the financial markets' confidence," Valeriano Gomez, the Spanish minister of labour and immigration said in a press conference that was also part of the LEMM, "but we also need to restore the citizens' confidence."

In the quest for a balance between austerity and employment measures, Gomez seems to lean more towards the latter.

All economies are different, and "some do need austerity," he acknowledged, "but not every EU country does, especially when there is a risk of recession," he said.

However, "in each country, the main priority is employment," he said, adding that there is a need for strong actions and especially so as far as youth unemployment is concerned.

Aside from measures to help professional training, apprenticeships and job market integration, in order to boost employment, Gomez pointed out that there also needs to be a social protection policy to guarantee unemployed ones with a minimum revenue.

The search for growth "in the future has to be in education, innovation and investment that young people represent," Gurria said, "we need to leverage this capital."