| Spanky |
03-23-2005 06:57 PM |
When are the liberals ever going to get it?
From the Economist:
The reluctant reformers
For the biggest failings in the euro area remain microeconomic, not macroeconomic. There is a reason why Denmark and the Netherlands have higher employment and lower unemployment than Germany and France: it is that the latter two have overly regulated labour markets, tougher hire-and-fire rules and high minimum wages. The evidence that excessive interference to “protect” people in work penalises those who are out of work has seldom been as clear as in Europe over the past five years. As this week's Lisbon scorecard from the Centre for European Reform (CER), a think-tank, shows, a similar story emerges on energy and telecoms liberalisation, competition in financial services, industrial subsidies and the rest: countries that have been fastest to open their markets to competition have outperformed those that have been slowest—notably France, Germany and Italy.
These three countries are still Europe's back-markers on economic reform. Their governments have pushed through some politically painful measures to shake up labour markets, cut pension burdens and increase working hours. But the CER report names Italy as the villain of the Lisbon piece. And Germany and France are leading the opposition to the EU's services directive, intended to liberalise cross-border trade in services. The effort to “protect” services from competition is spectacularly wrong-headed. Services now account for 70% of euro-area GDP, and for all of net job growth in the past five years. An official French report last autumn suggested that opening France's services sector to as much competition as America's could generate over 3m new jobs.
So why are the leaders of France, Germany and Italy so hesitant about reform? The answer lies in domestic politics. France's Jacques Chirac, behaving like a left-winger, is eagerly appeasing union protesters against change (see article). Germany's Gerhard Schröder, struggling with unpopularity, talks of more reforms, but on too timid a scale. Italy's Silvio Berlusconi is nervous about April's regional elections. Even Mr Barroso, opponent of decaffeinated reform, is reluctant to press for stronger measures, fearing that scare stories of American capitalism trumping the European social model may scupper referendums on the EU constitution. Such alarm is specious: if they look north, not west, EU leaders can see Nordic countries doing well and keeping their social model. It is not the Lisbon agenda that threatens the model: it is failure to reform.
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