West Europe wants to generate jobs but shuns big outlays

The governments of Western Europe's largest nations are under pressure to ``do something'' about high unemployment. So far, however, the leaders of the United Kingdom, West Germany, and France are resisting the pressure to do what they have done many times in the past: spend large amounts of money for public works and other job-creating programs.

European leaders also refuse to adopt ``Reaganomics'' -- an economic policy involving massive budget deficits and tight money.

``The room for maneuver . . . is not very wide,'' concedes Jean-Claude Paye, secretary-general of the Organization for Economic Cooperation and Development, which is based in Paris.

``Japan and the European countries are still in the process of trying to master the budget deficits they have experienced for many, many years. They want to put their houses in order.''

Indeed, Mr. Paye contended in a recent interview, it would be ``probably dangerous'' to promote too rapid economic growth in these countries. It could result in ``nonlasting,'' inflationary growth. `Show business' policies

This doesn't mean the governments of Britain, France, and Germany are unconcerned about unemployment -- or that they are doing nothing about the problem.

But to a considerable degree their policies today amount to ``show business,'' intended to impress voters, rather than old-fashioned, pump-priming spending.

West Germany, for instance, last week announced a budget for 1986 that includes a boost in funds for city renewal programs from 300 million deutsche marks ($100 million) to 1 billion DM and a reduction of half of 1 percent in the subsidized interest rate granted environmental programs.

As one high Finance Ministry official admitted, however, ``It isn't much.''

Despite a political defeat in May elections in the state of North Rhine-Westphalia, the government economic philosophy is one of ``no Keynesianism anymore'' -- that is, no major government spending programs to reduce unemployment.

Instead, the official noted, the German government will stick to its program of trimming the government deficit, other ``supply side'' measures, and keeping a tight monetary policy to restrain inflation.

The German budget calls for a 2.4 percent increase in government spending to $86.8 billion, an increase that should match or be slightly less than Germany's inflation rate. The deficit is to shrink fractionally to $8.2 billion.

Moreover, so far the government has refused to heed the urging of the opposition Social Democrats -- and some of its own members -- to advance a tax cut of 9 billion DM it plans for 1988 to the start of 1986, when it has already scheduled a 11 billion-DM tax reduction.

One Bonn diplomat saw Chancellor Helmut Kohl's economic policy as one intended to assure the voters that the government was concerned about unemployment and ``doing something'' about it. But there is no real switch in policy, he indicated.

France's Socialist government has a number of programs -- such as job training plans -- intended to make work. Nonetheless, an official in the presidential Elys'ee Palace noted that France could not ``reflate'' by itself because this would immediately result in its international payments situation slipping seriously into the red.

In fact, Prime Minister Laurent Fabius has just approved guidelines for the 1986 budget which impose some of the most severe cuts in public spending since World War II. Last Tuesday the Bank of France imposed a squeeze on bank lending and other measures to restrain the growth of money. Tackling unemployment

The March budget of British Chancellor of the Exchequer Nigel Lawson was billed as an attack on unemployment.

It included an expansion of a ``Youth Training Scheme'' involving government subsidies to private employers who take on jobless school leavers not going on to higher education. It is expected to help around 292,000 of 16- and 17-year-olds.

Another program providing temporary work for the long term unemployed on community projects is to be expanded from 130,000 places to 230,000 places.

A third element of the British budget, effective this October, will reduce the cost of ``national insurance'' for lower-paid employees in an effort to stimulate the hiring of unskilled and less educated workers.

None of these are budget-busting measures. For example, the drop in national insurance contributions will amount to 160 million ($208 million) in fiscal 1985-86, a small sum in the scale of Britain's budget.

``There is no short cut'' to reducing unemployment, Mr. Lawson said in his budget message.

``If it were possible to create jobs simply by boosting government borrowing and government spending, there would be no unemployment in the world today, for nothing is easier for a government than to borrow and spend. Impatience is a bad counsellor.'' Deficits don't bring jobs

Lawson shares with politicians in West Germany -- and even some leaders of Socialist-governed France -- the view that huge budget deficits create inflation or other economic problems more easily than they do permanent jobs.

Government-sponsored programs can create temporary work, of course. But in order to really slash unemployment (13 percent in Britain, 8.7 percent in West Germany, and over 10 percent in France), a government program would have to be extremely expensive.

Basically, the three governments are relying on what might be called ``natural'' economic forces to gradually trim unemployment.

One of these is a slowdown in the number of youths joining the labor force. A bulge in school graduates, resulting from a baby boom some 18 or so years ago, is just about past. They expect modest growth rates to slowly provide more employment.

In addition, all three governments have been trying to introduce more flexibility in their labor and capital markets, hoping this will encourage business to expand and create more jobs.

Before the Bonn summit of the leaders of the seven top industrial countries, American officials were suggesting that a somewhat easier fiscal policy in Japan, Britain, and West Germany might reduce the danger of another world recession. They were concerned over the poor performance of the US economy in the first quarter.

With the apparent revival of the American economy in the second quarter, the fears of a world slowdown have faded a little.

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK