For years the old continent has not had any substantial growth and is struggling to remain competitive with the rest of the world.
There is one word that can summarize the root cause: vacations.
Not there
Is there a European citizen who was not faced with this kind of answers when trying to reach by phone the public administration:
“Sorry, the person dealing with your file will return in 2 weeks”, or “Mrs Smith works only from 8 to 12, please call back on Monday between those times”, or “Sorry, it’s lunch break, nobody here at the moment”, and so on. And you thought you were lucky because finally somebody answered the phone after trying all day on a non-bank holiday.
The painful solutions are known
Governments are ‘thinking’ of gradually extending the retiring age, but even a 2 years extension may face blocking forces. These are anyway small scale adjustments which will not dent the public finances and will not change the diffused mentality about the omnipresent welfare states.
Did you know that France air-traffic controllers have 31 weeks off a year?
Europe is simply not working enough and it does not have natural resources to compensate for its laziness: how can it compete?
Losing jobs
The answer so far was to dislocate production and run high value projects and services. Unfortunately the rest of the world is catching up fast on this too; there is no reason why a European firm shall be considered superior to another one in Indonesia solely because of alleged better education, innovation and infrastructure, and those advantage factors are arguable at best.
Instead the European firm has to work more and be able to rely on good and prompt answers from the public administration. The rising unemployment does not help either, on the contrary; by the way, one may argue that there is no point in cutting vacations and the rising retirement age if there is not enough work for everyone. Besides the complexity and bureaucracy of European employment legislation, the point is that Europe’s work is too expensive due to a number of factors including high wages, high duties and… vacations.
An organization, public or private, has to hire 20% more staff to maintain the same level of service and production than in other parts of the word, including US. In a globalized economy this is no longer affordable.
Pain now or later?
Europe has no choice but unwinding the perks and benefits that enjoyed for the past decades and stop living above its means or face serial bankruptcy. The big problem is that no government is strong enough to unwind the mighty welfare state, no way. Easy to add productivity hurdles, employment benefits and vacation weeks, impossible to remove them.
Even vague chit-chat about various hypotheses and face-lift fixes are by and large categorically rejected by the workforce. Better to stay unemployed on a low ‘salary’ than to work hard. The problem keeps getting postponed to the next governments and simply gets worse, as the latest financial and economic crisis has mercilessly highlighted.
What future?
Not fixing the root cause will further set Europe to decline and force it to run emergency fixes for the foreseeable future: it is the Japanese scenario. A long period of stagflation and currency crisis. With the added complexity of disparate countries running at different speed and using a common currency. The attraction for some of them to be able to use again the depreciation lever is high and that cannot bode well for anyone, including the virtuous countries which will see their export markets vanish.
Europe’s government response: it is summer again, guys, let’s enjoy our hard earned vacations! So be it.