Breaking the Vicious Circle of Youth Unemployment in European Countries: The Role of Labour Market Policies

Since the economic downturn, youth unemployment rates rose rapidly in several European countries. Simultaneously, the countries more affected by the economic crisis were also facing increasing public deficits. In this context, the EU developed a set of policies to both deal with youth unemployment and the rise of public debt. While policies to fight unemployment were inspired by the social investment perspective and saw the investment in human capital as the best strategy to reduce unemployment (Morel et al., 2012; Chung et al., 2012; Hemerijck, 2013); policies to reduce public debt saw structural reforms and internal devaluation as the best approach to restore competitiveness and reduce public expenditure (Armingeon and Baccaro, 2012; OECD, 2012; Varga and Veld, 2014; Sacchi, 2015). As a consequence, this led to a growing tension between these two policies because they relied on different approaches to tackle the crisis, the latter on a positive theory of the state, while the former on a negative theory of the state. In our paper we ask whether it is possible to simultaneously invest in productive social policies to fight youth unemployment and reduce public debt through fiscal consolidation policies? Although during the years of the crisis social investment scholars responded positively to this question (Hemerijck, 2013: 375), others emphasised the neoliberal character of the European integration project (Apeldoorn, 2009; Streeck, 2014, chapter 3). In their perspective, there is bias towards policies of neoliberal restructuring because there is an asymmetry between policies promoting market efficiencies and those promoting social protection..