from: http://www.economist.com/editorial/freeforall/current/index_ld9728.html Click Here: <A HREF="http://www.economist.com/editorial/freeforall/current/index_ld9728.html" >The Economist</A> ----- LEADERS Euroshambles THE echoes from the 1970s and 1980s are becoming oppressive. Oil crises, fuel shortages, street blockades and protests, currency woes, paralysed governments, excessive taxes: to many observers, both within and beyond Europe, it must seem as if the old continent is once again locked in the grip of its old disease, eurosclerosis, which first struck a quarter of a century ago, just after the 1973 oil shock. Was all the promise of Europe�s single market and its new currency, coupled with the oft talked-of spread of Thatcherite supply-side reforms across the continent, just an illusion? The answer is no. And yet the past few weeks have rightly shaken confidence in the new Europe. France�s government must take a good part of the blame for the dramatic spread of fuel-price protests to other countries, because of the concessions that it promptly and cravenly offered to the fishermen, farmers and truck drivers who took to the streets at the end of August (see article). But other governments have been clumsy and indecisive in their response�most recently Britain�s, which experienced the most crippling protests this week (see article). The immediate row in many European countries has concerned fuel prices, and in particular the taxes that are keeping them so much higher in Europe than in America. So far, other European governments have wisely resisted following the French example of promising, under duress, to cut or rebate their fuel taxes. But none has made any fist at all of justifying their level. Yet the argument for having high taxes on fuel, on both environmental and energy-policy grounds, is strong. Indeed, a far more convincing economic case can be made that America taxes its petrol too lightly than that Europe taxes it too heavily. The burden on consumers is hardly excessive, either: even in Britain, which has the highest fuel taxes in Europe, the real cost of motoring has stayed more or less unchanged over the past 25 years. By conceding that the proper focus for discussion should be the level of fuel taxes, Europe�s governments have also allowed the bigger villains of the piece, the OPEC oil cartel, to escape censure�with the big oil companies sheltering behind OPEC (see article). The irony is that one reason for having high fuel taxes in the first place was to reduce petrol consumption and encourage conservation, so as to lessen dependence on the cartel. European governments may have reached the politically acceptable ceiling on fuel taxes; but they should be far more robust than they have been in rebutting the arguments for cutting them. If anything, indeed, the case against a cut should now be much stronger because it is being pressed not in democratic debate but through illegal street protests. As Europe has learnt so often and so painfully in the past, to cave in to such behaviour serves only to encourage it. A similar failure to communicate and tendency to dither under pressure have marked the attitudes of Europe�s politicians to the weakness of their single currency, the euro. Early this week, as the fuel-price protests spread, the euro plumbed new depths against the dollar. Many voices are now proclaiming that the single currency has �failed� and that Europe�s sickly economies are doomed to be left behind by a resurgent America�and they do not come only from hardened British Eurosceptics. Recent polls suggest that support for the euro has sunk to new lows in Germany, and the Danish referendum that is being held later this month on whether to join the euro now rests on a knife-edge. Yet the facts argue against the euro pessimists. For one thing, the currency�s weakness is overstated. But more important, it is wrong to assess its success or failure only by reference to its level against the dollar. The capital markets have taken to the euro with a vengeance: it is now the currency of choice for many international-bond issues, for example. Its decline against the dollar has yet to wreak any significant economic damage. On the contrary, it has helped to boost Europe�s economies, which are growing more lustily than they have for many years. Indeed, they now look more likely to outpace than to lose further ground to the United States over the decade to come (see article). The blame game Europe�s politicians like to blame the media or the markets, but they should in fact be largely blaming themselves for creating the notion of a currency, and a continent, in crisis. At the outset, far too many touted the misconceived idea that a main justification for the euro was that it would be so strong as to challenge or even to topple the overweening American currency. This error has since been compounded by the politicians� failure to speak with one voice (or, perhaps better still, not to speak at all) about the currency�s value. Yet the real argument for the euro was that it would boost economic growth by unleashing new forces of competition across Europe that would foster more structural reforms to the continent�s inefficient labour and product markets. This is precisely what has been happening, albeit slowly and with little fanfare. Even tax reforms and tax cuts, hitherto largely taboo because they may threaten Europe�s much-vaunted social model, have started. But far from making a virtue of these structural reforms, Europe�s political leaders have preferred to pretend that they are not happening at all�even though it will be thanks to them that the single currency is most likely to recover its zip. The fault does not, in short, lie in Europe�s economies, which are doing well; nor in its businesses, which are looking more competitive than they have for many years past; nor in its workers, whose productivity performance is poised to catch up with America�s. It lies mainly with the politicians, who have proved unable to explain their (broadly sensible) policies to voters, and unwilling to deal effectively with the intimidation of street protesters. On reflection, it is no surprise that confidence in Europe has been so shaky. ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, All My Relations. Omnia Bona Bonis, Adieu, Adios, Aloha. Amen. 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