Europe Still on Slow Motion Course to Disaster

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.

Stories about problems in the eurozone often compare the “industrious” north to the “carefree” south. Or maybe the “easy-going” south. Or the “sun-drenched” south. The word lazy is seldom actually used, but it’s almost always implied. They’re just a bunch of sluggards down in Italy and Spain and Greece and Portugal!

As it happens, this isn’t true. According to OECD figures, Italians average about 34 hours of work per week. Portugal clocks in at 33 and Spain at 32. The industrious French, by contrast, work an average of only 30 hours per week. Germans punch in 27 hours per week and the Dutch 26.

The problem isn’t laziness, it’s lack of productivity. Italians simply don’t produce as much per hour as Germans, which means that in order to be competitive they have to be paid less. But over the past decade, thanks to hot currency flows into the south, inflation in Europe’s periphery has been high and wages have risen. A currency devaluation could take care of this, but since Germans and Italians all use the euro these days, that’s not possible. Nonetheless, one way or another, labor costs need to go up in Germany and France and down in Italy and Spain.

Unfortunately, as Paul Krugman points out this morning, that’s just not happening. Not nearly fast enough anyway. Labor costs in Italy have actually risen more than in Germany, and even in Spain and Portugal, which have risen less, the difference is tiny. Spain has made up less than one percentage point on Germany and only about three percentage points on France. At that rate, relative labor costs won’t get to where they need to be for decades.

“You can argue that adjustment is happening here,” says Krugman, “but it’s painfully slow — and not remotely fast enough to avert catastrophe on the current course.” This is true. At the same time, it’s also true, as Tyler Cowen points out, that “There does not exist any coherent, workable, political incentive-compatible plan whereby [periphery] governments borrow more, spend more, and ‘invest for growth.'” Something along the lines of Jay Shambaugh’s plan might work, but nothing along those lines is yet on offer, and Europe simply doesn’t have decades before something gives and the eurozone collapses. The question is, how long do they have?

We've never been very good at being conservative.

And usually, that serves us well in doing the ambitious, hard-hitting journalism that you turn to Mother Jones for. But it also means we can't afford to come up short when it comes to scratching together the funds it takes to keep our team firing on all cylinders, and the truth is, we finished our budgeting cycle on June 30 about $100,000 short of our online goal.

This is no time to come up short. It's time to fight like hell, as our namesake would tell us to do, for a democracy where minority rule cannot impose an extreme agenda, where facts matter, and where accountability has a chance at the polls and in the press. If you value our reporting and you can right now, please help us dig out of the $100,000 hole we're starting our new budgeting cycle in with an always-needed and always-appreciated donation today.

payment methods

We've never been very good at being conservative.

And usually, that serves us well in doing the ambitious, hard-hitting journalism that you turn to Mother Jones for. But it also means we can't afford to come up short when it comes to scratching together the funds it takes to keep our team firing on all cylinders, and the truth is, we finished our budgeting cycle on June 30 about $100,000 short of our online goal.

This is no time to come up short. It's time to fight like hell, as our namesake would tell us to do, for a democracy where minority rule cannot impose an extreme agenda, where facts matter, and where accountability has a chance at the polls and in the press. If you value our reporting and you can right now, please help us dig out of the $100,000 hole we're starting our new budgeting cycle in with an always-needed and always-appreciated donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate