The European Commission is engaging in a study to determine why the European economy is trailing behind the US.
The Commission’s spring report, the focal point of the March European Union economic summit, sets out in stark terms the reasons for the widening economic gap between Europe and the US.
It cites Europe’s low investment, low productivity, weak public finances and low employment rates as among the many reasons for its sluggish performance.
The draft report, to be published by the Commission today, warns that without substantial improvements “the Union cannot catch up on the United States, as our per capita GDP is 72 per cent of our American partner’s”.
It was four years ago in Lisbon that EU leaders, enthralled by the technology boom, proclaimed their intention to overhaul the US as the world’s “most competitive, knowledge-based economy” by 2010.
The Commission’s report suggests that such a goal now looks hopelessly ambitious, and will make sobering reading for EU leaders as they prepare for their annual update on progress in meeting the targets set at Lisbon.
Well, it doesn’t take a European Commission report to figure out why the European economy is underperforming. Here’s a few hints:
- European business has an incestuous relationship with European governments, and bribery and kickbacks are all too common. (See Credit Lyonnaise, Parmalat, Aerobus, ELF/Aquitaine, etc…)
- Europe is a regulatory nightmare in which the cost of following the EU regulations plus various national regulations is absolutely ridiculous – causing much of the latter problem as businesses seek to weasel their way out of the regulatory straightjacket imposed on them.
- European tax rates are confiscatory, causing capital flight to other countries. See what happened when Italy A:) dramatically reduced tax rates and B:) provided amnesty to those currently using tax shelters – the results was billions of Euros being reintroduced to the Italian economy thanks to Berlusconi’s wise tax policy.
- Spending nearly 25% on average of your GDP on government is a good way of ensuring that 25% of your GDP goes absolutely nowhere productive.
- Allowing public sector employee unions to dictate policy ensures that all government policy benefits public sector employees and everyone else ends up getting the shaft.
- Passing laws that prevent people from working usually doesn’t help in the productivity department.
- Having a labor system in which hiring and firing employees is nearly impossible means that no one will hire new people because they can’t get rid of people who aren’t contributing to the bottom line – which is why France’s unemployment is around 9% while ours is around 6% – and we consider ours exceptionally high.
There, there’s your report for you. If there are any EU economic commissioners around, they can stick the several hundred thousand Euros the study would have costed in my PayPal account.