Blame lack of reform for Eurozone unemployment remaining so high

Andrew Sentance
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Hollande's government can learn lessons from more successful European economies like the UK (Source: Getty)
We received good news on European unemployment this week. The total number unemployed in the Eurozone and across the EU has continued to fall.
The Eurozone unemployment rate has dropped below 11 per cent for the first time since early 2012. And the overall EU jobless rate is down to 9.5 per cent, its lowest level for over four years.
These figures are part of a consistent picture which shows an improving European economy – including stronger GDP growth, and rising business and consumer confidence.
But on any objective measure, European unemployment is still very high. The Eurozone jobless rate of 10.9 per cent is more than double the equivalent measure in the United States (5.3 per cent).
To understand why, we need to drill down into the figures for individual countries.
The EU jobless total currently stands at 23m. Yet over half of those without work live in one of four countries which are unemployment blackspots – France, Italy, Greece and Spain.
Just over a third of the EU population lives in these countries. In the rest of the European Union, unemployment rates are generally much lower.
If we take France, Italy, Greece and Spain out of the picture, the unemployment rate in the rest of the EU and the rest of the Eurozone is about 6.5 per cent.
This is just over one percentage point above the US jobless rate, so not far out of line.
High unemployment is not a problem affecting many countries in northern and eastern Europe.
It is regionally concentrated in southern Europe and France. These are economies which have been traditionally dominated by the public sector, which creates the need for high tax rates and stifles enterprise, innovation and economic dynamism.
They also have highly regulated labour markets, reducing employment flexibility.
Of these four unemployment blackspot economies, the one which has worked hardest to reform its economy in recent years – Spain – appears to be reaping the biggest growth and jobs dividend.
Spain is now one of the fastest growing major EU economies and unemployment is falling sharply (down by about half a million in the past year), even though it remains very high in absolute terms.
The French economy is at the other end of the spectrum.
The BBC economics editor Robert Peston recently produced a documentary entitled “Quelle Catastrophe”, highlighting the country’s bureaucratic and business-unfriendly labour market laws.
Very little has changed to improve matters under the Hollande government, and the French state will spend 57 per cent of GDP this year, the largest government spending ratio of any G7 economy.
France and southern Europe can learn lessons from more successful European economies like the UK.
The British economy has succeeded in recent years by having a flexible labour market, creating over 2m private sector jobs over this recovery.
We have done this while being a full member of the EU. It is not the European Union which is the biggest threat to job creation, but a lack of reform in some of its key member states.

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