One striking thing about the EU constitution vote, is that in their attempt to bribeconvince the French electorate, l'Escroc and his ministers overturned just about every economic reform they had already implemented and managed to put the brakes on other reformist European legislation. l'Escroc's dachshund has been just as wishy washy on the other side of the Rhine too and Signor Face Lift in Rome has been no better.
The FT has an editorial about this touchy subject today where it makes the excellent point that national politicians have tended to blame Brussels for unpopular reforms and how this has now backfired. It also makes the excellent point that
Third, and perhaps most important, has been the failure by governments to explain reforms. Governments have portrayed economic reform primarily as a belt-tightening exercise to improve competitiveness against Asia and Eastern Europe, rather than as a long-term strategy to improve economic growth.
This has been a huge tactical error. With wage costs in eastern Europe about a tenth of those in the west, it is no surprise that electorates are sceptical about the benefits of competitiveness-based reforms. At the same time, they are far more certain about the prospect of their own personal impoverishment, as the high savings rates in France, Germany and Italy show.
The reforms these countries need are those tailored to increase long-term growth. They include changes to their education systems and liberalisation of markets, including but not only labour markets. What deters high technology investment in continental Europe is not wage levels but the lack of qualified labour, restrictive hiring-and-firing laws and excessive regulation.
The last sentence is neatly illustrated by George at EU-Rota with a look at the Rigidity of Emplyment index and the unemployment rate.
Essentially the politicians of Europe have been unwilling to put a strategic necessity ahead of a tactical one. The mostly left-wing press in Europe doesn't help, but it is the lack of any attempt to make the case properly that has doomed economic reforms in Europe. I do not know precisely how this will continue but I predict that protectionism will rear its ugly head - indeed it already has to some degree. If this continues then the EU will follow the Russian and the Ottoman Empires into decline and eventual collapse. Unfortunately for Europe though no one else will notice because the new Asian giants, India and China, will provide all the products previously made by Europe without any problem.
Fortunately I do not believe that all EU nations will necessarily band together to commit group suicide in this fashion. Indeed I wrote a ten days ago that I thought the EU could split between the rigid, protectionist "core" and the more free-market edge and if we don't see any serious attempts at reform in the core I believe this will eventually prove to be the case. Eastern European politicians and voters seems less than enthralled with parts of the EU so the opportunity for the UK to lead a large breakaway group is present. The big question is what happens to those unfortunate nations who signed up to the Euro but may now be looking for an exit - Ireland and the Netherlands spring to mind here.