This ‘lost generation’ of youth is the EU’S major problem – but also its hope for the future
High unemployment and disaffection are feeding populism among the young. What can be done?
Outside a Mcdonald’s in Latina, Italy, and under the golden arches that represent perhaps the most recognisable symbol of globalisation, city teens sit with cigarettes and milkshakes, engrossed in a passionate debate about identity. The topic is whether a local park named after Mussolini should continue to bear the name of Italy’s fascist leader.
This is Europe’s lost generation, weighed down by endemic youth unemployment. After a decade of austerity and stagnation, some are reawakening the ghosts of their fascist forefathers as they search for meaning in an age of economic disruption.
They question whether, after the global financial crisis of 2008, the Eurozone bond crisis of 2012 and the migration crisis of 2015, the EU can deliver on its core promise to “enhance economic, social and territorial cohesion” between its 28 – soon to go down to 27 – members.
This should not come as a surprise. It is six years since Yanis Varoufakis, the former Greek finance minister, warned Brussels and Berlin that austerity imposed on his country would turn the EU’S economic periphery into “Bailoutistan”.
He warned it would create an economic gulf between Germany and France and everyone else within the eurozone and the young would pay the price of the bail-out. “A generation was sacrificed,” he said.
Europe’s black hole
In economics, there is a phenomenon known as hysteresis in which longterm unemployment acts as a brake on growth, with part of the labour market ossified. Put another way, thousands who lost out during the financial crash can never get back to work; they leave a hole in the supply of trained labour, reducing the ability of economies to return to prosperity.
This is the crisis facing parts of Europe. Aside from the individual human cost, hysteresis has major implications for the bloc’s southern Mediterranean countries. The gap between Europe’s rich and poor grows, and it may be too late for the EU, whose attentions were focused on keeping its strong economies afloat while growing emerging markets in the east.
Outside Mcdonald’s, Marco, 16, talks about his 26-year-old brother, who has struggled to find permanent work for nearly five years. He had hoped for a packing job only to be let down when the factory relocated to Slovakia (an EU member) for its cheaper labour. It is not an isolated case. Whirlpool, the maker of white goods, announced this year it would move production from Turin to Slovakia, putting 500 out of work. All the Eastern European states boast higher GDP growth than their counterparts in the southern Mediterranean.
Disillusionment and democracy
This makes Europe’s youth ripe for exploitation by populist and antidemocratic forces. In defending Mussolini’s name for the park, Marco tries to clinch the argument by citing Italy’s modern-day fascist party, Fratelli D’italia, invoking nostalgia for an era when Italy was one of the axis powers of Europe.
“This is our history,” he says. “What else can we take our pride from? That we built things once? We’re going backwards while other countries overtake us. We need strength again.”
The economic reality facing these teenagers raises questions over whether the EU can offer them a viable future, or whether Italy would be better off going it alone. The cause, at least in Latina, is relatively clear: young Italians are likely to be less prosperous, both now and in the future, compared to many other EU citizens.
Unemployment is just one factor feeding into a sense of abandonment. Italy’s children don’t have it as good as their parents or grandparents. The number of Italians facing poverty has risen by three million since 2008.
“This is not what we want,” said Marianne Thyssen, EU commissioner for employment, social affairs, skills and labour mobility, last year.
A year on, and only moderate progress has been made. A 2018 report from her department revealed that nearly 15 million people were still unemployed in the EU, of whom half were long-term unemployed and
3.8 million were under 25. In Italy, Greece and Spain youth unemployment was close to 40 per cent in 2017, according to the World Bank.
Broken prosperity machine
Wildly different unemployment levels are signs of a more fundamental inequality problem in the EU: GDP per capita in Germany is a third higher than Italy and double that of Greece.
In the early 2000s the aspiration that closer economic relationships among member states would create a harmonised “EU” standard of living seemed something worth voting for.
That economic prospects of the member states are diverging presents a serious threat to the European project. It had always been a core promise of the EU that membership would see the richer countries invest in the poorer states for the benefit of all.
This year, Kristalina Georgieva, the former European commissioner and current head of the World Bank, admitted that that process, fuelled by the transfer of so-called “structural funds” from richer to poorer states via the EU’S budget, was starting to stall. “The convergence machine works,” she said. “But not for everyone.”
That shift, which is leaving young people like Marco behind, is the underlying force that has fired up the neo-fascist and populist forces.
The reality for Europe is that there are no magic solutions to youth unemployment or inequality.
But tackle them, it must. The EU cannot afford to lose the economic potential of any of its young people. The population aged 80 or more is forecast to double by 2080, so the EU must find innovative solutions to get young people into high-value jobs.
Efforts have already been made, including the European Commission’s Youth Guarantee Scheme. Young people under 25 are supposed to be offered good quality employment, continued education, apprenticeship, or training within four months of becoming unemployed or leaving formal education. But according to its 2018 report, 75 per cent of young people in the Italian programme had not received any such offer for more than four months.
Only 40 per cent of those who left Greece’s scheme in 2016 – its third year of operation – were in a positive situation six months after leaving. And the scheme only covered 40 per cent of those not in work or training.
Essentially, the jobs gap between regions of haves and have-nots is not closing. A matchmaking tool cannot generate quality opportunities on its own. Many job seekers have left school early, lack experience or live in areas away from employment hotspots and with poor transport links.
EU split ...
Economists agree that no single silver bullet exists for tackling inequality. Ensuring that young people from Bulgaria to Spain grow old within the EU, rather than abandoning the continent, or turning toward separatist movements, will mean sacrifices from some states. Some of the options are “kill or cure”, admit many observers.
One advocate of radical measures is Charles Dumas, chief economist at TS Lombard and author of Populism and Economics. He believes many nations, particularly Italy, joined the single currency too soon. This undermined their competitiveness to the advantage of strong players such as Germany.
“One route would be for Italy and Greece to leave the euro,” Mr Dumas explains. This would instantly make the countries more competitive as national currencies would make their products and labour cheaper than if paid for in euros, he argues. It is quite an ask. It would require Berlin to effectively write off vast debts.
Such a move would be politically toxic. Many Germans already feel that they have had to foot the bill for the irresponsible management of public finances elsewhere. It is nevertheless something that could allow for a return to pre-2009 trends of growth for some nations.
… Or converge?
If Italy and Greece stay within the single currency, their membership will become more problematic if there is another economic downturn. The need to write off debts to spread prosperity more evenly will not go away.
The alternative to a Grexit or Italexit from the euro is closer financial integration, a route favoured by the French president, Emmanuel Macron, and which would involve giving the eurozone a separate budget, finance minister and parliament. The funds generated could be invested in areas to support younger workers.
But serious integration means loss of sovereignty for smaller member states and greater Franco-german dominance, a difficult sell in the current political climate.
Other solutions could be more national-level labour market reforms, such as those Mr Macron is attempting to push through in France, that can make it easier and less costly for firms to take on inexperienced workers.
But they risk feeding populist eurosceptic sentiment if people feel the EU is behind a move to erode their employment conditions.
Insecurity, even in growth
That risk is already evident a thousand miles north of Rome in the Lithuanian capital of Vilnius, where young people find it relatively easy to find jobs in a modernising economy. But there is a sense of personal economic insecurity.
In the city’s up-and-coming station district, Adomas Narkevičius, 25, makes a living as curator in a Vilnius arts centre. He lives alongside Soviet war veterans who were given their apartments by the former regime, and knows life both before and after Lithuania joined the EU in 2004.
“The EU has had a really positive economic impact… At the same time, there are a lot of worries,” he says, noting recent strikes as Lithuanians rebelled against a system they felt was unfairly skewed towards employers. “They are not caused exclusively by the EU. But there are new laws that have liberalised the workforce even more, like zero-hours contracts.”
In rural areas, where traditional Lithuanian culture is surprisingly untouched, the problem is a sense of being left out of a new European cultural identity. At the same time, the villages are being emptied of young people, who often migrate to western Europe in search of higher pay and broader horizons.
“In the countryside there’s a whole group of people who are left behind. It’s hard for them to find meaning,” says Mr Narkevičius.
Lithuania has styled itself as a start-up and technology hub. It has proved effective, but it means its share of EU structural funds (designed to help poorer states) will be cut.
It also comes amid warnings that relatively low wages will not be enough to keep Lithuania competitive as high-value younger workers, needed to fund pensions and economic growth, move away. For those left behind, the EU is held responsible for this “brain drain”. And that does nothing to foster pro-eu sentiment.
Sharing risks and rewards
The future of the EU rests with the young but only if they are skilled and continue to connect the EU with shared prosperity. Economic convergence may be unpalatable for some European governments, but a highly mobile labour market will demand it.
A pan-eu rainy-day fund – of the kind proposed by the IMF and supported by the Macron government – seems to be a first step that might gain traction. Germany has granted some ground on this and it may be viable.
However, there are not enough young native Europeans to pay for the EU’S elderly. There will need to be efforts to encourage a higher birth rate – and migration from outside the EU.
At a more fundamental level, the Marcos of Europe need to see how the EU’S vision of capitalism works for them. To meet the needs of the EU’S youth, there has to be an acceptance that the single currency is failing some countries. The answer is either to leave it, or to strengthen it.
“Unless you do this at the political level it’s not going to happen,” Mr Varoufakis says, “especially when markets are constrained by the incongruities of the euro system.”