Labour market prospects and policies to soften the impact of the financial crisis

This note presents employment policies aimed at containing the impact of the crisis on labour markets and assesses the effectiveness of these measures against a set of policy "do's and don'ts" and addresses the question whether further action is warranted.The global downturn is now strongly affecting EU labour markets. Member States are pursuing a wide range of employment policies aimed at containing the impact of the crisis on labour markets. We present a set of overarching principles to devise appropriate labour market measures aimed at mitigating the impact of the crisis and shaping a sustainable recovery. In particular, measures should aim at reducing the costs of adjustment and speed up transitions from old to new jobs to avoid more permanent losses in employability. Our assessment shows that measures undertaken so far within the framework of the European Economic Recovery Plan are promising. A stronger more co-ordinated response would help to soften the impact of much higher unemployment levels on Europe's potential rate of growth in the future.