The European economy is improving – but there’s a catch when it comes to youth unemployment

Hamish McRae
One third of people in the EU under the age of 30 who are in employment are in temporary jobs: Getty

Whisper it softly, for there is plenty of discontent across Europe – and not just in France – but much of the European economy is not doing too badly at all. Growth this year for the eurozone looks like being around 1.6 per cent, only a little lower than the number expected in the UK. Unemployment is creeping down, though at 9.5 per cent it is double the level of the US or UK. There is of course huge divergence between Germany (3.9 per cent) and Greece (23.5 per cent), but if you look at the area as a whole, job creation is now the fastest it has been for nearly a decade.

The economic story seems likely to get better. The most recent forward-looking indicators, the purchasing manager indices published on Friday, show that European business is more optimistic than it has been for six years. The business community in France, according to the PMIs, is actually more positive about growth than that in Germany. This is important, because it suggests that the European recovery is broadening out from its German base, and that the policy of ultra-easy money of the European Central Bank has worked.

So there is a cyclical recovery. At some stage in the next year or so the ECB is expected to start tightening policy, and there is a debate at the moment as to how soon and swiftly that will happen. The great question is whether there are also underlying structural improvements in the economy over and above this cyclical upturn. The position varies vastly from country to country and even from region to region – northern Italy is performing much better than the south – so generalisations are misleading.

You can pick out many sectors of excellence. There is the Mittelstand, the mid-sized companies in Germany that have powered German exports. There is the northern Italian fashion industry. French high technology companies are outstanding – and so on. But there is one common factor pretty much throughout the eurozone and that is that youth unemployment. That is over 35 per cent in Italy and over 40 per cent in Greece and Spain. Even where the young are in jobs, they are often temporary and/or part-time. Thus, one-third of people in the EU under the age of 30 who are in employment are in temporary jobs.

In Spain, Portugal and Poland it is more than half, and in Italy it is 45 per cent. Even in France and Germany it is close to 40 per cent. The lowest rate of temporary employment in the eurozone is 20 per cent. The one country in the EU where most young people who want a permanent job can get one is the UK, which has by far the lowest rate of temporary employment for the young – just 12 per cent.

It might seem odd, but actually it is a common sense response to onerous European labour legislation. Laws designed to protect existing employees have the effect of pushing the most vulnerable would-be workers, the young, into part-time and temporary jobs.

That leads to a paradox that will become more evident in this season of European elections, starting this weekend. There is growth in Europe, the strongest growth since the recovery began to take hold. No question about that. The statistics say that people are at last increasing their standard of living, though in the case of Italy this is still much lower than it was in 2007.

But it doesn’t feel like it for many of the young. In the UK the problem for young people is less the availability of a job but rather the low pay relative to property prices. On the Continent it is not being able to get a job at all, or having to piece together a living from a collection of part-time posts. The labour market reforms in Germany that enabled the country to get its unemployment rate so enviably low have come at the cost of creating the so-called mini-jobs, and excluding nearly half of its young from permanent employment.

There’s the rub: the economic story is getting better, but the political discontent will remain, whatever happens at the polls.