The Economist (20 June) writes: 'So far this recession has not been all bad for Europe. Above all, the past few months have looked good for the European concept of 'flexicurity'... Europeans will tolerate more flexible markets so long they have the security of generous social assistance of things go wrong".
It is true that most European governments have undertaken labour market reforms. They have asked their citizens to accept more flexible labour laws and wages. But were they really effective in securing more jobs? Spain was considered as a success but the only result was to produce a generation of young, precarious workers (called 'mileuristas', those who earn about a thousand euros) who cannot make plans for the future due to the uncertainty on the renewal of their temporary contracts. The country has now an unemployment rate close to 20% and the social assistance received by the unemployed is rather limited.
The issue is that inequalities in labour market access create a divide in our societies and render them vulnerable to any form of extremism. European governments are aware of the danger as shows the recent speech of N. Sarkozy at the ILO in Geneva. So what to do with the many millions of workers who will lose their jobs?
The response is far from being easy. One way is to encourage early retirement schemes which have a lower cost (also political) than mass lay-offs- and this will not be reflected in the rise of unemployment. Another more cautious solution (in fact preferred by most governments as being more socially acceptable) is to raise the retirement age to 67 to safeguard the pension systems. But this will not guarantee the economic future of Europe. Human capital is not fully valued - many young skilled workers accept unskilled jobs on temporary contracts or leave their own origin country.
Most politicians are scared by mass unemployment as they understand the moral and social consequences. But this does not mean that they will develop a vision for the future. We need a real debate on employment and education, as they are intrisincally related and also because they are the key to cohesiveness.