Employment-led recovery for Europe: an alternative to austerity

Employment generation should be a high priority for European policy makers, in particular in light of the extremely high levels of unemployment in many European countries in the aftermath of the globla financial ciris. Using the Cambridge Alphametrics Model (CAM) this paper compare and contrasts two policy scenarios: an austerity scenario and an employment-focuses scenario. In the the austerity scenario we assume taht the current basic direction of austerity policies is maintained through 2030. On the other hand, in the employment-focused scenario we assume increases in government spending, government income and private investmetn as the strategic basis to generate substantial increases in GPD and emplyoment in Europe. Our alternative employment-led recovery scenario also assumes that the European budget will be gradually increased and directed to spur public and private investment across Europe, and particularly in the Eurozone periphery. Results generated by the CAM model for these two scenarios show that European nations would experience significantly higher growth adn employment rates under our alternative expansionary employment-focused scenario.