Europe at a crossroads. What kind of structural reforms?

The observed shifts of the Beveridge curve are usually interpreted as resulting from structural changes in matching efficiency and in separation rates due to changes in the composition of labour demand and in the institutional settings. Two different positions are opposed in the literature, implicitly providing an explanation of what is observed in the peripheral countries: increasing efforts in reforming their labour markets and progressive loss of efficiency (outward shifts in the Beveridge curve).The paper argues that, given the fragile productive structure of the countries in the euro periphery, it is the lack of appropriate industrial policies, rather than the lack of flexibility in the labour market, that should be blamed for the increase in structural unemployment, which fiscal consolidation (in the periphery) has contributed to further increasing. To enhance growth and decrease unemployment, social investment, coupled with industrial policy, is necessary