Employment-focused recovery for Europe

Policy Study

Authors: Giovanni Cozzi (Foundation for European Progressive Studies) and Jo Michell (University of the West of England)

The Cambridge-Alphametrics Model (CAM) is used to in this study to compare and contrast two alternative scenarios for Europe. In the first we assume a continuation of current policies based on austerity measures and supply-side labour market policies. We contrast this with an ’employment-focused’ approach in which austerity policies are reversed and investment rates rise significantly in the context of expanded European budget. In order to reduce the costs of servicing high levels of sovreigh debt, we also assume that the debts of peripheral Eurozone countrieds above 60% of GDP are pooled into a European Debt Redemption Fund at a reduced rate of interest. On the basis of our projections we conclude that an emplyoment-focused recovery strategy is indeed feasible as a realistic alternative to austerity.