Europe’s Economy

Daimler Chrysler just announced that it will cut 8,500 jobs in Germany over the next year.

The world’s fifth-biggest carmaker said the move would cost 950 million euros, to be offset by extraordinary income and efficiency gains.
It reiterated its forecast for a slight rise in 2005 operating profit excluding charges to restructure its Smart minicar business.
The Mercedes division employed around 105,000 staff at the end of last year, of which some 94,000 were in Germany.
“These headcount reductions are indispensable. They will contribute to significant improvements in the competitiveness of Mercedes-Benz through an increase in productivity,” it said in a statement. “The measures will also contribute to the sustained safeguarding of production (in) Germany.”

So if all lost for Europe’s economy? Matthew Lynn says, “Don’t Blame Oil for Europe’s Economic Slowdown.”

If oil is so deadly to Europe’s economic prospects, then why is it that Japan appears to be emerging from a recession, when Europe is still stuck with miserable growth? Japan isn’t exactly famous for its oil wells.
Likewise, the U.S. Because taxes on pump prices are so much lower there than they are in Europe, the impact that an increase in oil prices has on consumers is proportionately much greater. And yet, U.S. growth rates remain significantly higher than Europe’s. The U.S. economy expanded an annual 3.3 percent in the second quarter, compared with 1.1 percent for the euro area.

Lynn concludes:

The reasons why Europe’s economy is growing so slowly are familiar: high taxes, dysfunctional labor markets, and restrictive monetary policy. The first step toward fixing those is honesty. Right now, that appears to be a commodity in shorter supply than oil.

Posted by on September 28th, 2005 at 1:17 pm


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