Nobel laureate for Economics: Reform labour market unless you want to end up like Spain

In Spain, where youth unemployment reached a historic high of 43%, temporary employment contracts were very little used, whereas Germany, where there is currently a workforce deficit and the lowest unemployment rate in the last 18 years, saw the fastest rebound because it allowed the labour market to become more flexible through temporary contracts and by cutting wages and working hours.

In Romania almost one in five unemployed as registered in the autumn of last year were under 29, with 160,000 youth unable to find a job at the time.

"The old jobs offer too much protection, the new jobs offer too little protection. One of the policies that could lead to a more flexible labour market would be to use temporary employment contracts with a duration of three or four years for young people who do not have access to the labour market at present, who should gradually get the benefits of the permanent employees," said professor Pissarides, who teaches at the London School of Economics.

He got the Nobel Prize for Economic Science along with economists Peter A. Diamond and Dale T. Mortensen for "Markets with Search Frictions" last year, a theory explaining why unemployment rate remains very high despite vacant jobs.

Professor Pissarides was the special guest of "The Future of European Labour Markets" conference organised by the European Commission in Brussels at the end of last week.