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Wednesday, September 20, 2006



Chaney: "consistent investment in information technology by European companies is the fundamental reason for the productivity revival in Europe, beyond cyclical developments."

I doubt this. I don't think that European companies are investing in all that much IT any longer. European IT companies would be doing a LOT better than they are.

First of all, productivity enhancement of this kind needs to be justified by (1) a response to competitive pricing, (2) a response to heavily increased demand or (3) greenfield site installations of production means.

None of this has been happening. I suspect that productivity is being enhanced because companies are getting more out of their staff, but maintaining headcount as is. This is particularly true in France and Germany where unions have understood that the choice is either to work longer hours at the same pay or the job goes abroad.

Chaney: "Since unemployment is falling without generating inflation, the speed limit of the economy is likely to be higher than previously thought."

I suggest that this is due to unused capacity in existing production facilities that are gradually being reabsorbed (brought back on line). In some instances, this has reduced unemployment. But, for us to believe reduced unemployment is a long-term phenomenon will require another three or four months of convincing.

Frankly, the sooner it does happen, the better. But, neither Germany nor Europe seem to want more unraveling of their intricate labor-protection laws. Which is protecting what? The jobs simply shift eastwards.

Chaney: "In France, the two forerunners for next year’s presidential election, Mrs. Royal and Mr. Sarkozy, are more reformist than any of the candidates I have seen since 1986."

I wouldn't be so upbeat. For instance, Sarkozy for all his dynamism reminds us of a young French politician who was called the "bulldozer" (in 1987) for his way of getting his way (and things done). He became PM and is now President, being blamed for France's "immobilisme".

Politicians rarely change politics as much as politics changes politicians. Methinks.

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