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The Long Decline of Western Europe?

It's election season in Germany, France and Italy, so the time for structural reforms is over.

Paradoxically, this could be good news for those who think that Europe should start contributing to world growth by expanding domestic demand. In fact, the current wisdom has it that the reason why France recently grew twice as fast as Germany is that French consumers have stopped worrying about social reforms.

As soon as French Finance Minister Nicolas Sarkozy decided to leave the government and start campaigning for the presidency, incumbent President Jacques Chirac abandoned all plans for reforms that might antagonize voters. So health reform or even partial pension reform must wait a few years.

At the same time, a recent "white paper" produced by a working group headed by the IMF's former boss, Michel Camdessus, which was charged with proposing the type of structural reforms needed to achieve growth, was received with the usual outcry from trade unions. Most of its reasonable proposals will soon become another example of forgotten good intentions. Back to business as usual in France.