Warning: 4.5m more jobs could go in the Eurozone

By Michael Millar

Date: Wednesday 11 Jul 2012

State austerity plans could lead to four-and-a-half million more people losing their jobs in the Eurozone by 2016, according to the International Labour Organisation (ILO).

The ILO, a United Nations agency responsible for overseeing international labour standards, said unemployment in the Eurozone could reach almost 22m over the next four years, up from 17.4m, unless policies "change course in a concerted manner".

Many countries in the Eurozone are pursuing tough austerity plans to reduce their deficits and put themselves on a sounder financial footing.

However, fierce political battles are being fought over whether more spending would be a better short-term way to get economies growing again.

The ILO said that if states didn't switch focus to more pro-growth measures by increasing investment then the economic crisis would deepen and an employment recovery would never take off.

ILO figures show unemployment has risen in more than half of the Eurozones 17 countries since 2010 and over 3m youths aged 15-24 are unemployed.

More than one third of working-age people in the Eurozone are either unemployed or excluded from the labour market, and long-term unemployment is on the rise, it added.

"According to the report, austerity has resulted in weaker economic growth and a worsening of banks’ balance sheets, leading to a further contraction of credit, and consequently lower investment and more job losses," the ILO said.

"It highlights the problem that Eurozone economies where unemployment is growing have dwindling resources to help jobseekers."

The ILO set out a plan to escape what it calls the "austerity trap".

It recommends:

- Making help for the financial system conditional on banks resuming credit to small firms
- Making shareholders pay for bailouts, reducing the need for taxpayers money or further austerity measures
- Providing investment and support for jobseekers, especially for young workers
- Income in different Eurozone countries is changed to match worker productivity

"Without a prompt policy turn to regain the trust and support of workers and enterprises, it will be difficult to implement the reforms necessary to put the Eurozone back on a path of stability and growth,” said Raymond Torres, head of the ILO’s International Institute for Labour Studies and author of the report.

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