While you are right to lay a good deal of the blame on generous unemployment compensation, that is by no means the only reason for Europe’s trouble with high unemployment. Another major factor is the barriers that many European governments put in the way of hiring. Specifically, many governments make it very hard to fire workers. They sometimes require firms to show why they are firing someone. They sometimes require extremely generous severance packages for fired employees. Because of this, firms are often reluctant to hire people because of the large costs associated with either firing unsatisfactory employees or laying off employees if demand drops.