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An agreement to generate employment

Investment to encourage job creation is more effective than a trickle of tax incentives

After a very long delay, it seems that the Spanish government and the EU economic authorities are gradually becoming aware of the disastrous consequences of unemployment — especially among young people — in Spain and the rest of Europe. A week after Angela Merkel publicly brought attention to the alarming number of unemployed youngsters in Spain, on Monday the vice-president of the European Commission, Olli Rehn, expressed his concern over Spanish unemployment and the problems young people face when trying to enter the labor market.

Staying true to his role, Rehn called on Spain to facilitate the creation of businesses. And, true to his, Spanish Economy Minister Luis de Guindos gave an answer that sounded unpromising: the Spanish government will take the measures it considers "indispensable" to correct the situation.

Once again, words are supposed to be the solution to alarming problems. It is not known what measures the government considers "indispensable" to contain youth unemployment, or to reduce total unemployment; but we do know that the unemployment rate among people under 25 years of age is 55 percent, and includes more than 930,000 young people.

Never can too much stress be laid on the drama of a whole generation without prospects, driven to emigration or to relying on the family. In the face of this situation, the government proposes correct, but excessively short-term solutions: tax incentives for businesses, subsidized Social Security contributions, easier fiscal conditions for exports... All this is very well, but the fact is that only economic growth — that is to say, investment — can generate sufficient employment to bring down a 26-percent unemployment rate in a reasonable time-frame.

As such, the Employment Ministry's strategy is a mistaken one. It is a matter of achieving significant increases in investment, for which subsidies and tax breaks are ineffective, unless they are implemented in quantities so massive as to compromise the country's financial stability.

What the government is proposing are essentially complementary measures; they will probably not function on their own, in a recessive conjuncture, without the previous stiffening of an intense investment stimulus. And Rajoy and his ministers know this, since they are demanding hard cash in the EU precisely for investment, or budgetary margins for doing this in each country.

In this respect, the proposal of Socialist leader Alfredo Pérez Rubalcaba deserves more attention than the government is giving it. Firstly, because the offer of an inter-party pact to promote employment is in tune with the public's chief concern; and secondly, because the idea is — through a 20-billion-euro fund, raised with EU help or without — to inject fresh investment to stimulate growth, and such an operation has a better chance of success than a myriad of tax exemptions; and lastly, because to seek growth by means of investment is in line with what the whole of Europe probably thinks about the problem of unemployment in the euro zone, and about the embarrassing unemployment rate in Spain.

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