Putting German taxpayers’ money on the line will be hard to justify if meaningful reforms do not materialise on the periphery. But such reforms are bound to take time. Structural reform of the German labour market was hardly an overnight success.
True enough, and German reforms were greatly assisted by the concealed devaluation represented by the conversion of the deutschemark into the euro, a boost that can only be dimly duplicated by depreciation of the euro as a whole (something that Ferguson & Roubini, not unreasonably, support). But as to the remark that “such reforms are bound to take time”, taxpayers in Germany, Finland and elsewhere in the euro-zone’s north are bound to ask just how long it might take to transform, say, Lisbon into Berlin or Helsinki. Italy, an entity with far more claims to be a nation than the euro-zone, has been unified for over a century and a half, and Naples is still not Milan.
And then there are those who are set on going in a different direction altogether. Not only is France’s new Socialist government lowering the pension age (to 60 from 62) for certain categories of long-serving worker, but there is also (as Patrick Brennan noted here yesterday) this (from the FT, and it’s worth repeating in the context of the Ferguson/Roubini piece):
France’s new Socialist government is to raise the cost of making workers redundant in an attempt to stem rising unemployment, which hit 10 per cent of the workforce in the first quarter of 2012, according to figures released on Thursday.
Michel Sapin, labour minister, said part of an “urgent” response to joblessness was to penalise companies that seek to increase dividends and maximise profits by shifting production to lower-cost locations – dubbed “stock market redundancies”.
“The main idea is to make redundancies so costly that it’s not worth it,” he told France Info radio.
Mr Sapin, who said he planned to introduce legislation after the summer, said the level of compensation for fired workers and the cost of converting an abandoned plant to new use should be made sufficient to deter businesses from resorting to redundancies.
Such a move would be in defiance of calls from business for an easing of the country’s already weighty employment protection legislation, which was singled out last week by the European Commission as one of the structural factors inhibiting the French labour market.
Somehow, I cannot seeing this as being exactly what Chancellor Merkel has in mind.