Of late, however, few seem willing to take these essential, fundamental steps. France’s privatizations seek less to make the country’s industry efficient and competitive than simply to raise a few extra euros for one-time deficit relief. The French government has actually gone out of its way to explain the lack of reform, insisting on control, despite the partial sales, so that state businesses can continue to serve as jobs programs instead of as international competitors. Italy, too, after taking preliminary steps under Monti, has muddled the effort. Instead of removing additional barriers to hiring, firing and efficiency, current prime minister Enrico Letta seeks to relieve youth unemployment by offering tax breaks to firms that hire young people. By leaving the market restrictions in place, all Letta has done is used public funds to subsidize firms that follow his orders. The rigid, costly, anticompetitive regulatory environment remains. Spain too has begun to question its own former reform efforts, as have Greece and Portugal. Without efforts to improve economic fundamentals in these countries, Europe’s palliatives, however easily extended, can work for only so long.
Mr. Ezrati is senior economist and market strategist for Lord, Abbett & Co. and an affiliate of the Center for the Study of Human Capital and Economic Growth at the State University of New York at Buffalo. He writes frequently on economics and finance. His new book, Thirty Tomorrows, linking globalization to aging demographics, is forthcoming from Thomas Dunne Books of Saint Martin’s Press.
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