Introduction: Changing Employment Standards in a Crisis-Ridden Europe

Abstract

On 15 September 2008 the investment bank Lehman Brothers was not too big to fail and in the end filed for bankruptcy; the Dow Jones fell by about 500 points. What started as a banking crisis caused by toxic mortgagebacked assets and derivatives turned into a credit crunch as banks refused to lend money even to each other, soon reached the real economy and took its toll on public budgets. Four years on, the crisis continues with unemployment standing at about 10 per cent in EU27. Young people, particularly in the Southern European countries, are especially hard hit. According to EUROSTAT data from autumn 2012, nearly every fourth European under 25 years of age is unemployed (Ploetz, 2013). The fact that the economic crisis occurred is not entirely surprising given the relative detachment of finance assets from real value creation. Debt bubbles originated from the combination of low interest rates, rapidly rising household debt and wors-ening ratios of money borrowed for mortgages to down payments. Although real wages have stagnated in recent decades, people were, nonetheless, motivated to ‘borrow and consume as if their incomes were improving’ (Stiglitz, 2010: 2), in order to keep demand levels stable. However, as Robert Boyer warned as early as 2000, an equity-based regime depends on monetary policies that control financial bubbles, since the risk always exists that the diffusion of finance may push the economy towards structural instability (Boyer, 2000).