This is reflected in the different fate of Europe and the US, over the last decade in particular. In the US, the policy guidelines and instruments for countervailing action exist.
Their central monetary authority, the Federal Reserve, is obliged to pursue both employment and price stability objectives. And the Fed has used its interest rate policy effectively in both respects.
Europe has lacked such a framework. All we have had has been a loose commitment to economic policy co-ordination, and 14 separate currencies.
The result? While the US recovered rapidly after each recession, Europe did not.
The paradox is, of course, that many commentators overlook this reality and ascribe US achievements primarily to its flexible labour markets, whereas such policies have led to costly social problems – the working poor, the crime and imprisonment – that we, in Europe, have more successfully avoided.
Now, at last, EMU will give Europe the opportunity to escape this policy trap – to emulate the positive aspects of US employment performance, while maintaining the inherent strength of the European social model.
The Amsterdam Summit was a watershed in this process of linking together economic and employment policy in the same agenda for jobs.
The new European Treaty has put employment centre stage, alongside the other main criterion of success – price stability.
Amsterdam, with Maastricht, have given us the tools and the policy guidelines we need to transform the long-run growth and employment potential of the European economy.
The new political understanding that these tools represent is
- that economic policy weaknesses and failures have been the root cause of Europe’s unemployment.
- but also, that, too often, unemployment in Europe has turned into long-term unemployment because of weaknesses in our social protection and labour market systems.
Too little emphasis on employability policies, and too much weight given to unemployment insurance and other income maintenance schemes, have, together, weakened our capacity to adjust.
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