Article 91. Economic Uncertainty in European Union Major Economies
The European Union has been trying to get itself established for a number of years. The failure of the approval of its constitution and the rejection of Turkey for membership are a clear indication of the fears of some of its future member states. The problem is in the disparity between prosperity levels among the participating nations specifically worker salary levels. The eastern block of former communist states in the EU’s mini economy are creating concern as thousands of manufacturing companies flee high wage and union controlled EU members for their cheap labor and relaxed union controls. The problem is due to the EU’s partial unification standardizing the currency as the Euro while member Nations still maintain their independent economies. The Euro has allowed the investment in industry to be made in any member nation while the movement of workers from one member nation to another is restricted. This has eased the flow of investment to nations where cheap labor exists while limiting the ability of foreign works to move freely between the EU nations to take the jobs.
The problem is more than just high labor costs unions are much stronger in France, Germany, Italy and some smaller states where they virtually control all employment. France is almost totally unionized not just in industry and government but farmers and students are also unionized. Last year a combined effort of the socialist and communist parties pushed through a 35 hour a week law and Frances unemployment grew as thousands of manufacturing companies closed their doors and moved to more industry friendly states in eastern Europe and Ireland. France has had employment laws for years which state that once an employee is hired for a job he cannot be laid-off or fired without bringing the matter before the courts. The result of this is that employers turn away new business rather than hire new employees because in a downturn in business they cannot layoff employees. The riots earlier this year among young unemployed mostly Arab ghetto residents were as a direct result of continuing high unemployment and little prospects. Recently France has been threatened with nationwide strikes to prevent a new law from taking effect that would provide a trial period of two years for employers to evaluate a young person under the age of twenty six before making them a permanent part of their organization. The French working public and students are determined to prevent the implementation of the new law which they see as a crack leading to the repeal of France’s labor laws. As more and more manufacturing jobs are lost the French nation will become increasingly dependent on employment in government and seasonal tourism and serious economic setbacks will likely be the result. A balance of payments problem will also most likely develop as Euros flow out of the country for goods manufactured elsewhere.
A similar scenario is also being played out in Germany which provides generous benefits to works including two months paid vacations. Italy also has its problems which are mostly caused by extremely powerful unions. Other member states like Belgium have very high taxes while the former eastern block communist states are experiencing a boom in employment and their economies. The adjustment will cause a leveling off of current wage disparities and will be most painful in France, Germany and Italy. For the most part Spain will be among those who gain with rise in general wage levels. It is difficult to determine how much of a problem it will become in each of the economies of the EU member states but I fear that France and Italy will be hit hard while Germany which still has enough external sales of its products has a better chance of avoiding an economic melt down.
