Berlin takes youth unemployment fight to Southern Europe

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German Finance Minister Wolfgang Schäuble and Portugal's Vítor Gaspar inked an agreement on Wednesday (22 May) to fight youth unemployment in the debt-laden Southern European state. A similar deal was signed with Spain last month in what the opposition Social Democrats described as a belated attempt to restore Germany’s image in Southern Europe.

As part of the agreement, signed in Berlin, Germany's state development bank KfW would help set up a Portuguese financial development institution and would "provide technical as well as financial support".

Germany is banking on bilateral deals to fight record youth unemployment in the eurozone, and announced a deal with Spain last month to channel money from private investors into credit-starved small- and medium-sized business.

Youth unemployment has reached a record 42% in Portugal and 57% in Spain as governments squeeze spending and raise taxes to try to get national finances under control, a condition for receiving international bailouts.

"The core of our work ... is to speed up the efforts against unemployment, especially youth unemployment," Schäuble said at a joint news conference with Gaspar after discussions in Berlin.

Youth unemployment "is not a Portuguese problem," he said. "It's not a German problem. It's a European problem. We all need to deal with it... at a bilateral level as well as at a European level. That's why we do it we do it with other governments as well."

Too little too late?

Berlin also has said it wants to work together with Paris on an initiative to fight youth unemployment in Europe. Schäuble said it would focus on involving business and making better use of European public money that has already been pledged.

The details of the initiative will be presented at a conference in Paris on 28 May. Chancellor Angela Merkel plans to invite EU labour ministers to Berlin on 3 July.

Policymakers in Berlin say in private that they are frustrated by a lack of urgency at the European Commission and that efforts to help such companies are held up by EU state aid rules meant to prevent unfair competition.

Germany believes such rules could be made more flexible under a bailout programme. The European Commission declined comment.

Economists and German opposition politicians said that while the job-creation efforts were going in the right direction, they should have been implemented alongside the austerity measures.

"The finance minister's desperate attempts to rescue the German image on the Iberian peninsula come too late," Carsten Schneider, budget policy expert for the opposition Social Democrats, said.

"The efforts for growth and employment should have been made at the beginning of the adjustment programme, not the end."

Young Spaniards head abroad

Spain's population shrank for the first time on record last year as young people and immigrants fled the crisis.

No details were given of the size of the programme to help Portugal but Gaspar said KfW would extend credit lines and take indirect equity stakes in small- and medium-sized companies.

Spain's and Germany's labour ministries announced labour market cooperation plans late on Tuesday, including enrolling Spanish youths in German vocational training.

Timeline: 
  • 1 Jan. 2014: Target date for Youth Employment Initiative to become fully operational.
External links: 

European Commission

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