Magazine article The Spectator

Only Fools and Europhiles

Magazine article The Spectator

Only Fools and Europhiles

Article excerpt

Every time one of his doomed money-making schemes collapsed in ignominy, a deluded Derek Trotter in the BBC's marvellous Only Fools and Horses would insist that despite this latest setback, 'this time next year we will be millionaires'. Few Brussels apparatchiks have ever ventured to Peckham, but they seem to have learnt a trick or two from David Jason's character, as can be seen by their touching conviction that an economic renaissance in the eurozone is always just around the corner.

In the same way that the Trotters' luck sometimes turned and profits briefly flowed in, only to be lost again in richly comic circumstances, the eurozone occasionally enjoys an uptick in growth by piggybacking on strong global trade. The good days never last, however, and there has been no real boom since the dotcom days at the turn of the decade. But that hasn't stopped some of the City's more naive economists becoming ludicrously overexcited by the latest batch of economic statistics.

They should grow up and take a closer look at Germany, which looks likely to expand by only 1.7 per cent this year. Despite this being its strongest result for years, almost every other rich country in the world will do better this year. Even more depressingly, thanks to Angela Merkel's economically illiterate decision to hike value added tax from 16 to 19 per cent next year to plug her gaping budget deficit, growth is expected to slump back to a pathetic 1.1 per cent in 2007. The long-trumpeted German 'recovery' is little more than a mirage, a strong performance by the country's exporters that is more than offset by desperately weak consumer and construction spending.

Meanwhile the eurozone as a whole is on course for growth of 2.1 per cent this year, falling to 1.8 per cent next year. That such lacklustre numbers have been greeted with whoops of joy by Britain's remaining Europhiles, as well as by the perennial optimists of the City and the financial media, shows just how low standards have fallen.

There was a time when the pro-euro crowd was predicting a new era of wealth and prosperity; now they seem to crack open the bubbly whenever there is any growth at all. The sorry reality is that what is celebrated as a great year for European economic progress would be decried as a catastrophic nearrecession in the US.

The core eurozone countries of France, Germany and Italy have seen their annual productivity growth gradually slow over the past 30 years, finally plummeting to below 1 per cent over the past decade -- despite (or because of) the introduction of the single market, the euro and the supposedly radical Lisbon reform agenda. In stark contrast, the US has seen productivity growth average 2.5 per cent a year over the past 10 years.

Remarkably, national income per person in France, Italy and Germany has fallen back to a mere 70 per cent of that in America, the largest gap since the late 1960s, thanks to lower levels of employment, falling working hours and Europe's failure to harness technology to boost productivity.

It should by now be clear that, in the absence of radical reform, even semi-decent levels of growth will remain unobtainable in the eurozone. The present lacklustre recovery is only due to the Continent riding the global growth cycle; as soon as the global economy slows again, so will Europe's. …

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