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Mrs. Nujin Suphaphiphat and Hiroaki Miyamoto

Section I: Introduction 1. While the labor market situation improved alongside the economic recovery since 2014 through 2019, the incidence of long-term unemployment (LTU) remained high in the European Union . The unemployment rate in the European Union (EU) increased significantly during the global financial crisis (GFC), peaked in 2013, and then fell considerably to the level below the pre-GFC period at about 6 percent in 2019. However, the incidence of LTU, the share of people who have been unemployed for more than one year to the total unemployed

Mrs. Nujin Suphaphiphat and Hiroaki Miyamoto
While unemployment rates in Europe declined after the global financial crisis until 2018/19, the incidence of long-term unemployment, the share of people who have been unemployed for more than one year to the total unemployed, remained high. Moreover, the COVID-19 pandemic could aggravate the long-term unemployment. This paper explores factors associated with long-term unemployment in European countries, using panel of 25 European countries over the period 2000–18. We find that skill mismatches, labor market matching efficiency, and labor market policies are associated with the incidence of long-term unemployment. Among different types of active labor market policies, training and start-up incentives are found to be effective in reducing long-term unemployment.
International Monetary Fund. European Dept.

reforms. In addition, policies should have measurable output-based targets, helping re-calibrate policies. Further collaboration with businesses, including in designing university curricula, could promote better match for labor market needs. Box 5. Tackling Long-term Unemployment in Bulgaria 1/ • Despite the strong labor market before the pandemic, the incidence of LTU in Bulgaria remained high. The incidence of LTU could be reduced by putting more resources into effective ALMPs, addressing skill mismatches, and promoting labor market matching efficiency, all of

International Monetary Fund. European Dept.
The economy contracted sharply amid two waves of COVID-19 infections, with the government providing sizable policy support. The outlook is very uncertain and the main challenge facing policymakers is to keep adjusting to changing circumstances. Over the medium term, structural reforms are needed that support inclusive income convergence toward advanced EU partners against demographic headwinds.