By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-Christine Lagarde, Managing Director (MD) of the International Monetary Fund (IMF) Monday said 20 million people are still unemployed in Euro Area which is of great concern.
This is coming on the heels of a book published by the IMF ‘’Jobs and Growth: Supporting the European Recovery’’.
According to Lagarde, as 2014 is beginning, Europe confronts both good and bad news.
The good news Lagarde said is that growth is finally picking up in the euro zone as it is slowly emerging from the deep recession, while the bad news is that 20 million people in the zone remained unemployed.
‘’Until the effects on employment have been reversed, we cannot say that the crisis is over,’’ she said.
Lagarde affirmed that two (2) trends are particularly troubling, now and for the future. ‘’First, the high level of long term unemployment is of great concern: almost half of those without a job have been unemployed for more than a year,’’ she said.
The IMF Chief said her second concern is the worry about the large number of young people without jobs: ‘’nearly one quarter of Europeans under the age of 25 who are looking for a job cannot find one. In Italy and Portugal, more than one third of under-25s are unemployed, and in Spain and Greece more than one half are,’’ Lagarde said.
According to her, the book “Jobs and Growth: Supporting the European Recovery,” analyzes today’s challenges head-on and proposes a roadmap for the continent’s recovery.
Lagarde further affirmed that the book’s analysis is informed by the relationship between jobs and growth, which is the proverbial two-way street. ‘’When unemployment is high, growth is slow because people consume less, and firms invest and hire less. This means that the most effective way of boosting jobs is to get growth going again,’’ she said.
She said in order to create jobs in the Euro Area, economic growth must be lifted, ‘’ by some estimates, an additional percentage point of growth in the world’s advanced economies would lower unemployment there by about half,’’ Lagarde said.
The roadmap to euro zone recovery, she said the new book has highlighted in three (3) medium and long term priorities which include putting in place all of the elements of a banking union; which would be an excellent place to start and would ensure the continued stability of the financial sector and address spill-over effects from potential instability. ‘’For the euro area, I believe that enhancing the institutional framework of the monetaryunion is urgent,’’ she said.
As a second priority, Lagarde said households, corporates and ultimately the public sector need to reduce high debt levels. ‘’A lasting pick-up in growth will remain out of reach until thebalance sheet legacies of the crisis are addressed. Given the slow pace of global demandgrowth, there is—unfortunately—little hope that these sectors will simply grow out of theirdebt problems’’ she said.
On the third priority, Lagarde said product and labour market reforms can make a significant contribution to realizing a country’s full growth potential.
She said being nimble and competitive opens up new opportunities in a world where production processes increasingly span more than one country. ‘’The Czech Republic and the Republic of Slovakia—which established themselves as important intermediate producers for the German automobile industry—are good examples of how integrating into a supply chain can, over time, enhance domestic value added and growth,’’ Lagarde said.
