PARIS: Save for the Netherlands, Europe's economies are languishing: according to the OECD, average growth in Western Europe will not exceed 1.6% this year, a drop from the 2.7% growth last year. Unemployment is also at record and near record highs almost everywhere. At the same time United States is growing at 2.2%, Japan at 2.6%, ... and China at 10.5.
The economic slowdown comes at the worst possible moment, as Europe readies itself for monetary union (emu), and the tough budget constraints imposed as a precondition for joining limit the governments' ability to use old fashioned stimulants to get their ailing economies moving. Quite to the contrary, the governments are told they must slash their social spending at the very time when their populations are getting restless. As a consequence, to the extent that European union is thought of in predominantly liberal economic terms, support for new European institutions may be in jeopardy.
The effect of past policies is also wearing off. The exit by the British pound and Italian lira in September 1992 from the European Monetary System gave those two countries spurts of growth. But those surges are subsiding and can't be repeated: Italy, reconciling itself to a modest 1.7% rate of growth, is putting forth the idea of revising the Maastricht criteria for achieving monetary union in 1999. In the UK, major trade union strikes have returned to the scene for the first time since early in the Thatcher era.
Even more ominously, the most stalwart supporters of further economic integration, Germany and France, are also exhibiting the most strains from today's economic asphyxiation. German GDP will grow a mere 0.5% in 1996, barely a fifth of Chancellor Kohl's modest projections last year. With 1% instead of the 2.2% growth forecast last spring, France is not much better. Unemployment is also very high in both countries: 12.5% on this side of the Rhine, 10.2% on the other. All the while, Bill Clinton can boast of the creation of ten million new jobs since his arrival at the White House in 1993.