With unemplyment currently running at a five year high of 10.7%, yesterday’s news that GM/Opel and KarstadtQuelle are to reduce employment further (‘Germany Loses 15,000 Jobs in a Day’ was the Bloomberg headline) could hardly come at a worse time. There is plenty of evidence of the long promised restructuring, but little of jobs growth. ‘Jobs churn’ US style does require the two halves of the equation to at least balance.
The future does not look inviting. The FT puts it as follows: “KarstadtQuelle?s problems have been exacerbated by the extreme reluctance of Germans to increase consumer spending.” Actually I have been arguing that this ‘extreme reluctance’ isn’t simply shyness, and that there are clear structural reasons why this is the case.
At the same time continued downward revisions on the global growth outlook following the oil ‘spike’ mean that export driven economies like the German one can expect little relief on the global demand front (ECB president Jean-Claude Trichet is the latest to warn on this front, changing the banks emphasis earlier in the week to slow growth rather than inflation as the main concern).
Again – in a kind of ‘euro lament’ – Bloomberg sums up a rather bleak week week like this: “At least eight reports in the past week signaled slowing growth in the $9 trillion euro economy. The pace of expansion at manufacturers and service companies cooled, retail sales declined and industrial production in the region’s three biggest economies dropped more than economists forecast”.
To put all this in perspective, I think it is worth remembering that only six months ago most commentators were anticipating that we would now be entering the vigourous upswing of that long awaited recovery. As it is almost all the indicators seem to be pointing towards negative.
With rather bad timing the World Economic Forum (warning – pdf) this week released a report suggesting Germany had the 3rd best business environment in the World (after the US & Finland)
http://www.weforum.org/pdf/Gcr/Business_Competitiveness_Index_Porter
“the 3rd best business environment in the World”
Well then, we could say that the ‘environment’ is good, but the ‘system’ doesn’t seem to be adapting to it very well :). (This is a sort of veiled reference to the work of the late German sociologist Niklas Luhmann).
I don’t think that throwing money out of a plane over Germany would help too much these days.
Sure, employees are scared and pissed off at the management over in Detroit that is very much responsible for the problems of Opel – much more so than the cost structure. But the mayor of Ruesselsheim, one of the GM/Opel plants most severely affected by the restructuring plans is quoted in local edition of today’s Frankfurter Allgemeine, stating “It’s bad, for sure, but this is a region where we can weather a lot.”
In the neighbouring region of Rheinhessen, for the first time in a long time, there have been more job offers for appreticeships than there have been applicants.?
Change and growth are coming back. But I’m sure it won’t be visible in aggregates for some time. It’s still a weak signal thing.
Sorry my comment was a little unclear. It came 5th in ‘Business Environment’, 1st for ‘Business Strategy and company operations’, which made 3rd overall in ‘business competitiveness’.
I don’t think we should take them too seriously. France is lower than Slovakia on the ‘technology ranking’.
October 15, 2004
Productivity Convergence?
Stephen Roach (New York)
It feels different in Europe. The pain of stagnation has evoked a powerful backlash that is finally driving meaningful structural reforms. Europe has nowhere to go but up, and that long and arduous journey now appears to be under way. America, by contrast, is at the top of its game — coming off eight fat years the likes of which most leading economies have rarely seen. But now burdened with an unprecedented shortfall of national saving, a record current-account deficit, and a massive overhang of debt, it will be exceedingly difficult for the US to keep the magic alive. At work over the next several years could well be the beginning of a stunning productivity convergence between the US and Europe — a shift that could have profound implications for the global economy, financial markets, and currencies.
The transformation in European sentiment regarding its economy has been classic — from denial to capitulation to despair and now to anger. Over the past year, in my travels to Europe, I have detected increasingly visible signs of this latter stage — a palpable sense of anger and frustration. I was back in Europe this week only to have these observations confirmed yet again. But now there is an important twist: Europe is in the process of converting its angst into action — ushering in a long-awaited structural transformation that promises to alter the efficiency, competitiveness, and, yes, productivity of this vast and heterogeneous region. Like all such transformations, the changes are hard to see in the beginning. Over time, however, they build on one another. Europe is now making meaningful progress in putting several of these key building blocks in place.
Two such developments strike me as most important — the first being an improvement in labor market flexibility. This has been concentrated in the core of Old Europe — Germany and France — where workers and businesses are now coming together to challenge the mandated rigidities of shortened work schedules. Germany is the leading case in point — offering the tantalizing possibility that the nation that is hurting the most is now ?getting it? the most.
The European tax-expensive welfare state has come into the stage of long hopeless stagnation. With governments spending almost 50% of GDP, what else can you expect, afterall? The Franco-German statism is out, out, out. Full stop.
Job world and Jobless world… this has been a huge problem since the times people started making money and bringing food back home. I really envy people of the past who didn’t have to work 12-14 hours a day to survive. But perhaps they had some other problems which we are not aware of? Erh..