Youth Unemployment

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Lessons learnt from the EU crisis: looking forward

This article was featured as part of ESSA’s annual Equilibrium publication.

The EU crisis has been painful for EU citizens and policy-makers alike. However, it’s not necessarily all bad news. With a long-term outlook, it is possible that the Eurozone could be stronger for the crisis. More specifically, the crisis has exposed the need for stricter adherence to Eurozone membership requirements and ongoing policy management focused on maintaining economic growth.

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Youth unemployment in the EU

Hysteresis in the periphery

Recently, financial markets around the world have undergone a sharp correction in response to fears of an eventual tapering in the Federal Reserve’s Quantitative Easing program. The reaction was spurred by Ben Bernake’s, Chairman of the Federal Reserve, comments to the press that QE will be slowed if unemployment falls to 7% and inflation remains within their target. Cautiously this may be sooner than expected as the US economy is beginning to show sustained periods of healthy increases in employment growth.

However, the same cannot be said for the European Union. GDP in countries in the periphery continues to decline, with Italy suffering a 2.4% decline and Greece a 5.6% decline in the first quarter of 2013. Alarmingly it’s Italy’s worst recession in 20 years. With this persistently poor performance, comes the danger of hysteresis.

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