Monday, May 02, 2005

The EU - just another player in the orchestra

Yesterday was a triple celebration in Hungary – Mother’s Day, Workers/Labour Day, and the 1st Anniversary of EU Accession.

The Europa concert, with Sir Simon Rattle conducting the Berlin Philharmonic in the Budapest Opera House, was probably the highpoint of the day - pieces played were by Bartok, Berlioz and Stravinsky. Nonetheless I must admit to being a little disconcerted by the schoolchildren, out on Andrassy Ut, who sang the EU Hymn dressed with EU blue and yellow scarves tied around their necks; not so many years ago children here would have sung socialist “hymns” with red scarves around their necks .......

At the Financial Times is yet another editorial that underlines the need for leading Eurozone states like Germany and France to embrace structural reform, or stagnate and rot away. This has been a constant theme on this weblog.

.... the OECD argues in papers published ahead of today's ministerial meeting, more trade in services will stimulate innovation, raise incomes and create jobs - provided countries adopt the right domestic policies. The OECD does not mention the European Union services directive by name, but its analysis shows precisely why Europe needs such a measure, and what EU states should do to make a success of it .........

...... France and Germany fear service imports from low wage Eastern Europe will destroy domestic jobs and drive down wages. In fact more cross-border trade should create jobs and raise real incomes even in the richest states. But - and this is a serious proviso - it will only do so if domestic labour and product markets are flexible enough to allow workers to move from declining sectors to expanding ones.

One way to speed mobility is to cut unemployment benefits, as Germany did recently. But this is not the only answer. Tightening eligibility requirements and switching subsidies to in-work benefits can also play an important role. Excessive employment protection laws, which deter employees from switching jobs and discourage employers from creating new full time positions, can be eased. Wage bargaining systems can be overhauled to ensure they allow movements in relative wages. Governments can work with employers to finance skills and retraining, and address rigidities in the housing market that prevent workers from moving in search of work.

This may look like a daunting agenda. But it need not amount to adopting an Anglo-American economic model wholesale. Without such changes many EU states will continue to stagnate and may well emerge net losers from the services revolution. The choice is theirs.

Full text @ Jobs and Services
However, it seems that for some people the European Union’s dreams of becoming a leading global power do not even feature, even if by some miracle structural reform is embraced. Joseph S. Nye in an op-ed entitled An India-China Axis? recounts that:
As one Indian strategist put it to me during a recent visit, “By 2030, we envisage the US, China, and India as the three largest powers in world politics. We don’t want a China- or a US-dominated world, but if we had to choose, it would be easier for us to live with the latter.”

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