The truth may be disturbing, but Europe should face up to it. The gap between European and U.S. and Asian industry is growing at an alarming rate. For a brief moment, it seemed as if the European Union bureaucrats in Brussels had finally screwed up the courage to tell it like it is. "Europe is trapped in a vicious downward spiral," warned a draft of a soon-to-be published report on Europe's competitiveness. But wait. Before the report could be issued, timid EU ministers demanded that these blunt phrases be purged from the report. In the end, the EU released a politically correct official version, which contained the kind of mind-numbing verbiage that only bureaucrats can produce.
If Eurocrats can't begin to grapple with reality, how can they expect national politicians or chief executives to push overdue and unpopular reforms? A bland report doesn't fool anyone. National champions such as Olivetti are history. France's homeless sleep in miserable huddles on the streets of Europe's most elegant city. German companies pour all their investment dollars out of the country because of such bloated-but-sacred entitlement programs as 100% sick pay. The moment for change is now. If Europe hesitates, it will curse the next generation with a slow, irreversible erosion of the standard of living.
There is still much to be valued in the EU report, if one reads between the lines of the heavy bureaucratic language. It warns that Europe lags significantly behind the U.S. in labor productivity and employment. While the report concedes that the main responsibility for competitiveness lies with companies, it calls for governments to wake up and benchmark themselves on key areas, such as tax policy and labor market flexibility. A set of standard indicators that compares labor regulations in Europe, Japan, and the U.S. would provide guidelines for a serious rethinking of outdated rules and practices in Europe. Vocational training, research and development practices, venture-capital formation, and financial markets should also be examined.
EU bureaucrats need more spine. But even in its watered-down version, their report calls for much-needed change. It should be heeded by policymakers throughout Europe.