Strategies for economic recovery The longevity of the current economic and financial crisis confirms that it is different from the one observed after the Great Depression of the 1930s. In Europe, because of the common currency shared by a number of EU member countries and differences in their economic competitiveness, devaluation is not a simple tool for recovery. Massive public interventions in the market at the beginning of the financial crisis were connected with huge increases to public deficits. If we add to this high levels of public debts, which in some European countries like Ireland, Portugal, Italy and Greece are higher than 100 per cent of GDP, it is obvious that stimulating economic recovery by increasing public spending is not a simple solution. A strategy is needed which involves public investments along with public policies such as reform of labour markets (i.e. integration of labour and development policies), financial regulation, sustainable development,

innovation stimuli, a sound mix of coordinated monetary and fiscal policies and institutional strategies towards better governance for both public issues and private business. Chapter by chapter, throughout the book, these strategies, policies and institutions will be analysed. Governments obtaining finance from markets, and the big fluctuations in costs accompanied by the huge impact of private rating agencies, are the next factors which harm the possibility of pursuing effective long-term economic policy. The experiences of implementing austerity measures which can reduce public deficit in the short term are negative and are accompanied by increases in unemployment and the decline of GDP, which can also lead to political destabilisation. The consequences of cuts in public spending can therefore cause more negative impacts on economic growth and, in effect, increase budgetary problems. At the same time we have observed the consequences of ageing populations on social security systems, and in many countries the real decline of welfare state instruments. The falling fertility rate in most EU countries during the economic crisis may significantly weaken the competitive potential of Europe. There are increased numbers of voices claiming that economic recovery cannot be based solely on free market mechanisms. Effects of public spending and related fiscal, budget and monetary policies should be calculated from the perspective of social aims such as poverty reduction or employment. Employment, specifically, requires decisive action as, in some EU countries like Spain and Greece, the unemployment rate among people below 25 is higher than 50 per cent. There is a fundamental question as to what type of mechanisms are most effective at improving the economic situation and stimulating youth labour markets in Europe. The length of the current crisis has a strong impact on citizens’ state of mind and may lead to different kinds of frustrations and protests. Sometimes these frustrations are slowly formalised, like in the case of the so-called Occupy Wall Street Movement. In this book we try not only to put forward a structural approach to analyse the crisis; we put forward also a general framework of alternative policies and institutions different from the mainstream approach and we suggest also single and specific policies solutions at the micro level, such as credit unions, financial regulation, worker and consumer co-operatives in contributing to the sustainability and growth of economies in time of crisis, decent work, and firm competitiveness and innovation. As regards this last issue, within global market conditions, an economy’s competitiveness is the most effective way to maintain standard of living. This is especially important for developing economies. During the crisis, limitations of available sources for R&D have had a negative impact on innovativeness. From 2006 onwards we can observe, for example, the permanent decline of patent applications to the European Patent Office in the European economy’s 27 countries. Firms are looking for cheaper methods of achieving higher competitive positions, for example through advanced design or reducing labour costs and wages. All these challenges provide the framework for discussion about necessary changes in economic, social and fiscal policy, enabling the return to stable economic growth.