And if unemployed youth were not the problem? A conversation with Daniel Gros

According to the German Economist, numbers released by the government “exaggerate the issue.” Instead we need to “support prime age workers.” And for Italy “we don’t need more money but reforms”

And what if the problem weren’t actually youth unemployment and money for investments? Obviously there are two issues that must be resolved, but they might not be the central issue for the European economy and in particular, the Italian one. Daniel Gros, esteemed German economist, deeply enamored with Italy (He speaks our language almost perfectly, learned also thanks to his studies in Rome, where he obtained a degree with Federico Caffè.), who directs The Center for European Policy Studies (CEPS), a prestigious Research Center in Brussels, is convinced.

“The problem of youth unemployment was extremely exaggerated for political purposes. The problem actually concerns a smaller number of people,” explains Gros, illustrating a study produced together with his younger colleague Mikkel Barslund. For example, according to data compiled by CEPS, in Greece among the youngest from 15 to 19 years of age, the unemployed rate is only 6% not 66%, as stated in the official data because only 9% of this age group is actually looking for a job and 2/3 of them don’t find one. The issue will be the focus of the European Council in Brussels here today and tomorrow, but will be addressed, sustains the Economist, in the wrong way. The proposals that are under review by the Council will have a short and limited impact and – he stresses – risk damaging other sectors of society” because they detract resources that could be used for measures to help workers in adulthood, perhaps fathers, whose unemployment has more serious consequences inasmuch as “they lose subsistence for themselves and for their dependents,” and on average they tend to have higher income levels, therefore contributing in a much more significant way than a young person to support, for example, the pension system. “We risk distorting the fair development of the labor market, therefore not obtaining the result of creating jobs for youth and also damaging the system,” asserts Gros. Essentially, the Economist argues, we need to be patient and keep a level head. “When the recession ends, youth will find employment easier than the ‘prime age’ now – he insists when he reminds them that anyway there is always less work for youth – the task of politics is to mitigate the effects of unemployment on those who have people depending on their income.”

The youth, claims Gros, are used yet again as a consent form by politicians: “They are not the real problem – he explains getting worked up but always with that intelligent looking smile – but in fact an issue is there too, even if it’s not a priority. So the politicians say ‘we must solve this problem’ and who is going to tell them they are wrong? Who can contradict them? But this is only about a way to divert attention from the real issues.”

And a real issue, especially in Italy, is that according to Gros it is “useless to send more money for investments. It would be wasted, as has happened in the past and as will happen again, if we do not re-establish the financial system from the ground up.” According to the calculations of the Director of CEPS, “for example for small and medium-sized enterprises in Italy there was much more invested than in Germany, but the result, return on investments was equal to zero. What is needed is not capital, but the restructuring of the financial system, the banks.”

“Not money, but reforms – he concludes. Italy has had much in the past but must learn how to spend it better.”

Lorenzo Robustelli