Money Observer
The Arab Spring has transformed the political landscape of North
Africa, leading to regime change in Tunisia, Libya and Egypt (amongst
others) and reform in Morocco. In recent decades rising living
standards and literacy rates, as well as the increased availability of
higher education, have resulted in a general rise in the standard of
living and, as importantly, an increase in expectations across the
region. This, in turn, led to tension between rising aspirations and
the ‘deliverability’ of meaningful reforms, especially to a
better-educated and internet-savvy youth. Indeed, a university
professor in Oman, Al-Najma Zidjaly, referred to this upheaval as a
‘youthquake’.
It is to be hoped that this lesson has not been lost across the
developed world. In Greece and Spain, more than 50 per cent of the
under 25s looking for work are unemployed (although it should be noted
that this does not take into account those in education or training).
Portugal, Italy and Ireland have a youth unemployment rate of more
than 30 per cent using the same measure reflecting the sharp rise
across the developed world since the onset of the financial crisis in
2008. Critics of the measure point to the fact that, if you look at
the wider universe of the under 25s rather than simply the subset of
those seeking employment, the number looks far more reasonable.
According to an Organisation for Economic Co-operation and Development
report, the number using this methodology comes out at about 18 per
cent for Greece, Italy and Spain. In fact this Neet (not in
employment, education or training) statistic doesn’t really account
for those who are simply in education or training because they cannot
find work. Part of the issue lies in arcane working practices. For
example, in Italy, under current rules a newly-hired employee with a
permanent contract has the same protection as someone who has worked
for the company for 30 years. This creates a huge disincentive for
employers looking to hire more staff and has encouraged the use of
short-term contracts. Clearly, this is a potential powder keg waiting
to blow as the social strains of a disaffected and disillusioned youth
grow and grow.
To put this number into some context, in Italy alone there are 600,000
unemployed young people. One of the major events in the establishment
of the modern state of Italy in 1861 was the expedition of the
thousand, led by the legendary Giuseppe Garibaldi. Perhaps sedated by
a diet of reality TV, electronic devices and social media, modern
youth will be less revolutionary than their brethren on the southern
shores of the Mediterranean, but I would not be so sure. Certainly,
job creation was very much on the agenda of François Hollande in his
Bastille Day interview, and remains one of the core demands from
premiers Rajoy and Monti in Italy and Spain respectively.
As for Italy, as if these problems were not enough, theFinancial Times
reported recently that former Prime Minister and cruise ship lothario,
Silvio Berlusconi, is preparing to make a comeback. Berlusconi does,
of course, have a well-documented interest in youth but it seems
unlikely that his re-emergence onto the political stage in Italy will
be beneficial in the current situation. Maybe his control of vast
swathes of the Italian media landscape will enable him to provide the
intellectual tranquillisers required to lower the political pulse of
the young unemployed. In any event, international patience had already
worn extremely thin with Berlusconi at the time of his replacement by
Mario Monti and is unlikely to welcome the return of a man whose
handling of the crisis in Italy was characterised by soundbites rather
than concrete action. At a time when bond yields in the peripheral
nations remain at acute levels, a swift resolution seems unlikely and
we are, I would suggest, likely to see a protracted period of
uncertainty until there is some balance drawn between these political
and economic difficulties.
By Rob Burgeman, divisional director at Brewin Dolphin
Europe must combat youth unemployment problem
Rob Burgeman at Brewin Dolphin
