Working Paper No. 93 - A common economic crisis but contradictory responses: The European experience 2008/09

In the aftermath of the 2007 US initiated financial crisis, labour market conditions have deteriorated between mid-2008 and mid-2009 across all European countries with massive employment losses recorded in both advanced economies and emerging economies. However policy responses to mitigate the economic and social effects of the crisis have differed dramatically across European countries that are confronted by this common challenge. The present paper documents the employment effects of these policy responses and shows that the gap in employment performance between advanced economies and emerging countries of Europe could widen after years of slow convergence, with negative consequences for social cohesion. It argues that strengthening multilateral coordination is needed to avoid a reversal in social and economic progress.