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The European Foundation for the Improvement of Living and Working Conditions (Eurofound) will tomorrow publish its European Restructuring Monitor (ERM) Annual Report 2009 called 'Restructuring in Recession'.
The report notes that the impact of the recession has already been significant for most Member States in terms of job loss and rising unemployment. Experience of previous recessions, however, shows that the labour market may continue to deteriorate well into 2010, particularly when the large number of temporary measures to maintain employment have matured across Europe.
Eurofound argues that more coordinated macroeconomic responses at European level are required.
The main policy response to the recession in Europe has been a return to fiscal demand stimulus policy. At Member State level, the anti-crisis packages have included a combination of support to enterprises, tax reductions and increases in minimum wage to foster consumer demand, increased public sector employment and reduced employment taxes. Many companies throughout Europe have taken initiatives to maintain jobs, most prominently, various means of reducing working hours.
In countries such as Germany, which have extensive public support for these schemes, job loss has been minimal due to the shortening of the working week. Other company-level initiatives include production stops, obligations to take annual leave, shorter working weeks or days, enhanced use of working time accounts, leave rotation and sabbaticals.
These efforts are putting enormous strain on the economies of individual Member States, and since they are designed as short-term responses, the report argues that there is clear role for the European Union to coordinate efforts in the longer term. The report argues that given its strong competition policy mandate, the EU will have a vital role to play in ensuring the avoidance of a protectionist response from Member States.
The issue of protectionist state aids is likely to figure prominently in the forthcoming policy debate. If the recession is as deep as many fear, there may even be good arguments for at least temporary public support for crisis industries, the report argues. It is crucial, however, that this does not disturb the functioning of the Single Market. This can only be avoided with EU-level industrial policy or coordination. It may be that the current recession will spark a significant development of EU industrial policy.
The report will be launched in Dublin on 5 November 2009 at the fourth Foundation Forum, which will take place on 5-6 November 2009. It can be downloaded by clicking here