The question that any analyst of Europe asks is whether the E.U. can be revitalized or whether it is fated to continue an incremental downward spiral to marginality. While pundits on both sides of this political equation have opinions, answers aren’t readily available.
All one can look at are signs, but these are available in abundance.
The French who often tell rude jokes about Boring Belgians are now seeing rich French figures who have found their next door neighbor an escape from draconian French taxes. The Halley’s of the Carrefour supermarket chain have settled in Belgium as has Philippe Jaffre former head of Elf Aquitaine, the state oil company.
Fiscal exiles include singers Charles Aznavour and Patrica Kaas; the actress Emmanuelle Beart and Isabelle Adjani, among others.
For those who are obliged to pay at the highest income bracket (80 percent) as well as a “solidarity tax on wealth,” it often means an annual tax bill greater than their income. In order to conceal the effect of onerous taxes, the French government estimates that the flight of capital accounts for a loss of about $2 billion a year while unofficial estimates have it closer to $30 billion.
France obviously needs this tax revenue to support the generous compensation for the unemployed. All an out-of-work person has to do to maintain generous benefits is call in every six months to confirm that no new job has been secured. Prime Minister Dominique de Villepin has proposed giving the unemployed a bonus of $1200 for taking a job, even as the government weighs a three strikes rule - a loss of payments if three job offers are turned down.
When the government tried to make it easier for small companies to lay off workers, thousands of strikes took to the Paris. Apparently French workers don’t realize the easiest place to lose a job is also the easiest place to find a job.
Whenever enlightened French officials discuss the value of privatization, they are obliged to retreat from that position because union leaders refuse to give ground from the commanding heights of the state guided economy.
According to one study the average French pay stub lists more than 40 deductions, compared to two in Britain and four in the United States. The government says it doesn’t want anyone’s tax bill to exceed 60 percent of household income, but as long as it refuses to eliminate the anomalous wealth tax, the proposal is little more than an empty wish.
France, of course, is not alone on the socialist scale. Germany has a minimum wage almost twice as high as the one in France and it also suffers from an unemployment rate of over eleven percent.
Mrs. Merkle’s lead during the recently completed campaign virtually evaporated when she discussed the need for social welfare retrenchment. A dose of the medicine needed to put a charge in the lackluster German economy is still not politically acceptable. As a consequence, the near tie in the election has left Germany without a policy direction and close to political paralysis.
Clearly if things get worse, change might be more readily accepted. Yet the downward slope in Germany with the precarious status of the banks and the intractable high unemployment rate might well have served as a catalyst for reform. But a mandate for change did not emerge from the election.
This analysis, of course, is a snapshot. History, on the other hand, is a montage. Yet a montage is composed of snapshots. What one sees is ominous. Decline is palpable. In fact, the axis of the world’s economy has already shifted from the Atlantic to the Pacific. World shaking events surround us and for most Europeans the news cannot be good.