Thursday, April 08, 2004

Can Europe Reform?
I'm on a little IHT kick and the have had a few articles on the stalling attempts at reform in Europa. I was thinking just yesterday that it is funny how there is an accepted common wisdom in the media/political/economic classes that Europe needs to reform, and yet 1) actual Europeans haven't gotten the message and 2) not many people apply the same logic to the US. "Oh, France clearly needs to rein in their social welfare spending because it is destroying their economic growth, jobs, and fiscal picture... and by the way, the US needs a single payer health plan and Medicare has to be expanded, etc." I don't quite get how that happens.

Anyhoo, the IHT has a front page article today on how everyone "knows" reform is necessary, but yet it never happens.

"Forecasts of structural change in Europe have been plentiful - and wrong." But then he goes on to make the same prediction. The idea is that the expansion of the EU to the East will force more competition. However, Europeans seem to have an unlimited ability to shoot themselves in the foot. I expect they will continue to complain that capitalism is destroying their countries while simultaneously upping their dose of lethal socialism.

Last week, the European Union cut its forecast for growth in the euro area this year to a paltry 1.7 percent, less than half its increased forecast for the United States. Changes that strike economists as necessary and inevitable scare many voters. The voters are prevailing.

And a couple days ago they reported that France and Germany find reform doesn't get easier. This article focuses on Germany and it describes the self-delusion of the German electorate, although I would like to know HOW this happens.

In Germany, where some taxes have been lowered and some suppleness brought to the labor market (but without a spurt of economic growth), speculation is now ablossom that jagged-edge reform measures are over and done. The r-word, it is said, should be used by the government only in connection with feel-good areas like research, vocational training and innovation. The line among Social Democrats is that if the Legislature in the country's biggest state, North Rhine-Westphalia, falls in 2005 after 39 years with an SPD hand on power, Schröder goes, too, in 2006.
This week, the fastest-rising book on the main German nonfiction best-seller list, at No. 5, is called, in rough translation, "Germany, the Decline of a Superstar." ... For Steingart, apart from the radical reform of the German tax, labor and social welfare systems, the country cannot regain its lost standing without confronting existential structural problems.
But he turns much of his fire on Germans' lack of willingness to deal with reality. Germans, in the face of recent history, he writes, hold their hands in front of their eyes in refusing to admit that the German Model has disappeared. The political class recognizes it, says Steingart, a journalist at Der Spiegel newsmagazine, but the country's continuing fearful gaze has blocked a meaningful change in its politics.

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