Jobs are well established but not Germany

The situation of the European economy at the beginning of the year 2006 seems clear: the Germany resurfaced, float the France and the Italy flows. This order of things seems to have taken two words ressassés ad nauseam for a good decade: "structural reforms", i.e. treatment of weight loss of the welfare State and labour market flexibility. The Germany's commitment, the France tries, the Italy is fun. The arithmetic sum of these national destinies is positive: the eurozone seems out of its economic torpor, and recovery, while slow, is finally here, after five long years of famine. Why stop in so good way It should be that the France and the Italy follow the German way, in the interest of all Europeans! A watchful eye to the nature of the German recovery and the use of the wisdom of the fountain should at least encourage us to caution.

To begin with, and without this no way detracts from the eminent qualities of the new Chancellor, the author of the German recovery, if it indeed exists, is called Gerhard Schröder. In politico-économique, Angela Merkel today derives profit (on the wire) for a virtue whose il well despite his inherited fruit to his opponent. But, above all, the German resumption appears uncertain because it is against nature: in contrast to the fable of La Fontaine, it was a beef that wants to be as small as a frog.

Indeed, the strategy of growth by the Germany since 1999 is now well identified. It is to greatly reduce the cost of the work to improve the competitiveness and win export markets. According to the OECD, the largest European country is poised to succeed his bet: on the one hand, German competitiveness index measured in cost per unit of labour improved almost 10 points from 1999 to 2005; on the other hand, the volume of exports of goods and services, after having increased by 2.3 in 2003, grew by 8.3 in 2004 and would still increase of 6.6 in 2005. But as evidenced by the last flock of statistics published in recent weeks, the German recovery, as before the US recovery, is currently a "jobless recovery". Jobs are well established, but not Germany. The IFO confidence index is certainly at the top, but retail sales remain fragile and the job market is sluggish, the unemployment rate continuing even to slightly increase. It is that there is growth in Germany, as in the United States, that there is momentum of domestic demand. The Germany is a large relatively closed country (a "beef") for which international trade is that about a third of GDP, in contrast to the Ireland, European model of the "frog" including the opening rate more than 88. German growth curve thus follows that of domestic demand since 1999, the quasi-recession from 2003 to the current weakness (1.1 per cent growth in 2005, which is still modest).

What does hold, then, German choices First the idea that the euro area, large closed countries, has more that never needs a macroeconomic policy enables to fully realize its potential for growth. Initiation of European restart, to welcome it, is currently a recovery by proxy, which depends on the prosperity of the world and not of the vitality of Europe. It will be a straw fire if European demand is once more steamed by fiscal and monetary policy excessively rigid.

Then, the fate of the big European countries cannot be transform into frogs, because the pond is not broad enough. The German strategy is similar to a single rider reminiscent of the beautiful hours of competitive disinflation, social replacing the rate of Exchange as a competitive weapon. National strategies, effective they are in the short term, should yet more enhancement: the recovery in Europe will be true if it is European.