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Franco-German Youth Jobs Push Seen Hinging on Company Credit

Franco-German Youth Jobs Push Seeks to Damp National Differences
Jobseekers enter an employment office after opening in Madrid. Youth unemployment in the EU will remain above 17 percent until 2015, the International Labor Organization said May 8 in a report called “Generation at Risk.” Photographer: Angel Navarrete/Bloomberg

Germany and France said companies in struggling euro-area countries need cheaper credit to create jobs and ease youth unemployment, as Europe’s two biggest economies seek a joint response to the debt crisis.

German Finance Minister Wolfgang Schaeuble, his French counterpart, Pierre Moscovici, and Werner Hoyer, who heads the Luxembourg-based European Investment Bank, all singled out higher company financing costs in southern Europe as an obstacle to economic recovery at a meeting in Paris today.

“An Italian or Spanish small or medium-size enterprise doesn’t fund its investments at the same rate as a German company,” Moscovici said. “The channels of financing aren’t working.” Schaeuble said soaring youth unemployment in the region undermines European unification.

French President Francois Hollande and German Chancellor Angela Merkel have pushed competing views on how to kick-start growth throughout the 17-nation euro bloc, with the French leader urging less austerity and Merkel calling for a reduction of debt and deficits with labor-market overhauls to fuel hiring.

The German government had indicated that it planned to present a joint blueprint with France today to spur job creation for young people worst hit by recession and the fallout from the financial crisis. The proposals may involve the EIB leveraging 6 billion euros ($7.8 billion) being made available from the EU through 2020 to yield as much as 60 billion euros in loans to tackle joblessness, Germany’s Rheinische Post reported May 13.

Stabilizing SMEs

The EIB is deploying 40 percent more funds, or almost 70 billion euros a year in the next three years to fight unemployment, Hoyer was cited as saying in an interview in Germany’s Bild newspaper yesterday.

Differing financing costs for euro-region companies are a “serious issue,” Hoyer said today. “If we don’t stabilize” the situation for small and medium-sized enterprises, “we won’t stop unemployment in Europe.” Even so, some expectations of the EIB’s lending ability are exaggerated, he said, without giving further details.

Germany announced a program last month to help boost financing for Spanish small and mid-size companies, avoiding what Schaeuble said then was “the long route through European institutions.”

“We want, also bilaterally if necessary, to work with everybody to strengthen in particular the equity and debt financing of small and medium enterprises,” Schaeuble said in Paris. “That’s why we’re having bilateral programs with Spain, with Portugal, with Greece.”

KfW Bank

While the German government hasn’t provided details, Der Spiegel magazine reported on May 25 that the plan would involve loans by Germany’s state-owned KfW development bank to southern euro-area lenders in a bid to ease the north-south gap in company borrowing costs.

Schaeuble sought support for bilateral aid to troubled euro members in a letter to German Economy Minister Philipp Roesler, dated May 21, in which he expressed hope for “quicker support with tangible, psychologically effective results in a manageable period of time.”

Schaeuble also urged Roesler, who leads Merkel’s Free Democratic Party junior coalition partner, to back an easing of European state aid rules that might keep European funds from quickly reaching banks undergoing restructuring, according to a copy of the letter obtained by Bloomberg News.

‘Dramatic Figures’

“Almost 6 million unemployed young people -- these are dramatic figures,” German Labor Minister Ursula von der Leyen said in an ARD television interview on May 26. “These young people need an answer now.”

The euro-area economy will probably shrink for a second year while unemployment will rise to a record 12.2 percent, the European Commission said May 3 in a forecast. Youth unemployment, defined as people below age 25 without work, rose to 24 percent in the region in March, according to a Eurostat report published April 30.

The average masks rates of 55.9 percent in Spain, 38.3 percent in Portugal, 38.4 percent in Italy and 26.5 percent in France. Youth unemployment in the EU will remain above 17 percent until 2015, the International Labor Organization said May 8 in a report called “Generation at Risk.” The rate in Germany in March was 7.6 percent.

German officials have pushed for exporting their so-called dual-education system, which has roots dating to the Middle Ages. It combines apprenticeships at mainly private companies with vocational education in about 350 professions.

Vacant Apprenticeships

Von der Leyen said there are 33,000 vacant apprenticeships in Germany and that Berlin needs to bring in young people from other countries to fill them.

The “difficult economic situation in several euro-area countries” can provide “an impetus” for boosting labor mobility in Europe, though achieving an integrated labor market is a “very long task,” Merkel told reporters in Berlin today.

In the German state of Saarland, which borders France and where youth unemployment is 6.5 percent, attracting French youths to fill German apprenticeship is a hard sell, Annegret Kramp-Karrenbauer, the state’s premier, said in a May 16 interview in Saarbruecken.

“It’s difficult to get French youths to take apprenticeship positions in the Saarland,” Kramp-Karrenbauer said. “It’s partly due to language. But it’s also due to the fact that what we call the dual-education system, which for us is a very high quality education, doesn’t have much prestige in countries like France and Spain and others.”

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