EU leaders seek to boost youth jobs, SME lending

European Union leaders early today signed off on initiatives to reduce the bloc’s youth unemployment and boost lending to small and medium-sized firms, amid pressure for them to take credible action on growth and jobs ahead of several key elections.

The bloc’s record joblessness “won’t be solved overnight,” EU President Herman Van Rompuy warned. But the summit showed that leaders consider unemployment to be “a joint responsibility — economically, socially, politically,” he argued.

Youth unemployment has received particular attention amid fears that a “lost generation” is in the making. Across the EU, 5.6 million people under the age of 25 were without jobs in April, with rates in Greece and Spain already over 55 per cent.

“In some parts of Europe, we have a social emergency,” European Commission President Jose Manuel Barroso said.

“Youth unemployment must be reduced because young people cannot be blamed for the failings that have emerged in the last few years,” German Chancellor Angela Merkel told lawmakers in Berlin, before travelling to the Brussels summit.

Her country is preparing for elections in September, while voters across the EU head to the polls next year to choose a new European Parliament. Concerns are rife that eurosceptic parties will make strong gains.

The leaders agreed in Brussels to bring forward a 6 billion euro ($ 7.8 billion) youth guarantee scheme, so it takes effect in the next two years rather than gradually until 2020.

Van Rompuy said even more money was likely to be available in the end — pushing the total up to as much as 8 billion euros — because of newly agreed flexibility in the EU’s budget.

But some politicians said that more will have to be done.

“We spent 700 billion euros on the bank rescue system and now, after much hesitation, 6 billion to fight youth unemployment. I still think that is unbalanced,” said European Parliament President Martin Schulz.

Austrian Chancellor Werner Faymann said that amount should be spent every year to tackle the problem, saying it was crucial that young people were “not disappointed, without hope, frustrated.” “We cannot allow ourselves to blindly watch an entire generation... get stuck in the starting blocks,” added Luxembourg Prime Minister Jean-Claude Junker.

Others argued, however, that funding alone would not solve the problem.

“We can pump money into this but it will only work if the countries are ready to reform their labour market,” said Dutch Prime Minister Mark Rutte. “It is the only way toward economic recovery.” His British counterpart, David Cameron, said the priorities were “getting control of spending, making sure we live within our means and then making ourselves more competitive, getting rid of regulations, making it easier for businesses to create jobs.” Merkel argued that it cannot be “primarily about creating new pots” of money.

“Political leaders cannot shy away from sometimes unpopular structural reforms of labour markets, tax codes and education systems,” Finnish Prime Minister Jyrki Katainen added.

Even more important than the youth guarantee scheme were plans for the EU to boost support for small-and medium-sized enterprises (SME), Schulz said, since “they are the ones that make the most jobs available.” Barroso called them the “life blood of our economy.” Leaders agreed that forces should be joined with the European Investment Bank to boost lending to smaller companies, which employ a significant share of Europe’s workers.

Van Rompuy said the EU’s work on setting up a banking union would also help solve the issue “in a lasting way.” Hours before the summit, EU finance ministers had struck a deal on new rules to wind down troubled banks, as one step towards that union.