There have been a lot of sighs of relief in Europe lately, where countries like Britain and Spain, long in recession, have finally started to grow. Not by much, nor for long. But such is the political imperative to suggest that all the misery of fiscally tight economic policies was worth the pain that there are tentative claims the worst is now over and, ipso facto, austerity worked.
Hold on a minute. Growth is good. Growth is what allows countries to pay down their national debt by increasing economic activity, putting the unemployed to work and making people prosperous enough to pay taxes. But gross domestic product growth alone is not enough to provide adequate sustained prosperity if it does not also lead to significant job growth.
Take Spain, which has just emerged from two years of recession by posting a third quarter growth rate of 0.1 percent. Technically the Spanish slump is over. But a glance at their job figures shows the country has a long way to go before it can genuinely say it has escaped the diminishing effects of austerity — in the form of tight fiscal policies, public spending cuts and labor and entitlement reforms — imposed indirectly by Germany through the European Union.
In Spain, unemployment remains stubbornly high at 26 percent; half of those age 25 and under are still without jobs. More than half those age 25 and under in Greece and Croatia are also unemployed. In Europe, only in Germany and Austria is youth unemployment under 10 percent. Greece and Spain lead the sorry list of European countries with more than 25 percent unemployed, and 13 more are enduring joblessness at more than 10 percent.
In Spain, where economic growth is occurring only in the export sector, there is little suggestion the economy has been genuinely fixed by this protracted austerity regime. As one analyst put it, “Domestic demand is still contracting and against that backdrop it’s hard to see a strong and sustained recovery.”