Why Europe remains in trouble

by on February 18, 2005 at 5:19 am in Current Affairs | Permalink

"Deutsche Wertarbeit" is becoming a thing of the past:

This anecdotal evidence, albeit from the heaviest users and sharpest
critics of cars, highlights the trouble in which Mercedes finds itself.
Its reputation for quality lies in tatters as it has been forced to
admit that its cars, which once set the industry standard for
reliability, are prone to breaking down.

Last week the Mercedes
Car Group, which includes the lossmaking Smart small-car brand,
reported its worst quarterly profit for 13 years and admitted that this
year might be more challenging still. It even suffered the ignominy of
seeing its profits overtaken by Chrysler, the previously struggling US
mass-market carmaker that merged with Daimler-Benz in 1998.

For
Germany’s taxi drivers, this comes as no surprise. "Opels [made by
General Motors of the US] are half the price of Mercedes and the
quality is now the same," says Anis Ahmad, a Frankfurt taxi driver with
an Opel Zafira.

Mercedes has slipped in the past decade from first to 28th place in the respected JD Power reliability survey [emphasis added].

Here is the full story.

The French have their own means of addressing stagnation:

The French government yesterday signalled a new approach
to tackling the country’s unemployment crisis by stimulating the
creation of low-paid jobs in the domestic services market.

Jean-Louis
Borloo, the labour and social affairs minister, said the government
would spend €1.43bn ($1.9bn, £970m) over the next three years to boost
employment by up to 500,000 jobs in domestic services such as cleaning,
childcare, gardening and help for the elderly…

As part of the jobs creation package, Mr Borloo announced the formation
of a state agency to oversee the domestic services market. This agency
will help to bring black market workers into the formal economy by
offering them welfare benefits.

In relative terms, yes this is progress.  But the simplest way to keep wages high is, in fact, to allow wages to fall.  Counterintuitive, yes, but that is how we economists earn our keep.

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