Europe`s Ails Considered

Despite the all-time high euro on May 27, no cheers could be heard. Instead, news of record-low approval rates for the ruling party and the worst-ever strikes in Germany and France, driving forces on the European continent have hit home hard.

The two countries are having external problems due to the U.S. threat of retaliatory measures regarding their opposition to the Iraqi war. And even in Britain, the widening gap between the rich and the poor is pressing the leadership of the Labor Party led by Prime Minister Tony Blair.

According to a survey conducted by Germany`s privately-managed broadcasting company RTL, the approval rate of the ruling Social Democratic Party fell to 25% down 1% from a week ago. The lowest approval rating is attributed to the nation`s worst-ever economy since unification with trade unions, long-time backers of the party, who have since turned their backs on it. Hardships in the German economy which is the true engine of Europe, is now impacting the whole of the continent. The unemployment rate in the nation well exceeds 11% (4.5 million people).

The German economy`s plunge is due to pressure of social security and excessive protection of labor rights, experts say. The economic magazine `Business Week` said that the main culprits are the Labor Protection Law which does not allow contract-based employment, and social security from companies. Moreover, unification costs, accounting for 4% of annual GDP since 1990, add an increased burden on the economy.

At last, German chancellor Gerhard Schroeder recently came up with an economic plan called Agenda 2010. The envisioned plan covers lightening the requirements for lay-offs, raising the flexibility of the labor market, and reducing the social welfare spending such as jobless allowances and health insurance. Nevertheless, the reform plan is facing resistance from trade unions and inside the party.

Amid the controversial pension reform, France is faced with a nationwide walkout of subway and hospital workers from June 2, followed by air traffic controller strikes on May 27. Although the former right-wing government in 1995 yielded to them after the 3-week walkout, the current right-wing government led by President Jacques Chirac and Prime Minister Jean-Pierre Raffarin is standing firm.

The French government, concerned about depleting pensions, is pushing through reform while major unions claim that the burden of pension reform should be shouldered by companies, not by workers.

Even Britain`s Prime Minister Tony Blair is confronting the labor unions. The British trade unions have long supported the Labor Party. However, as the prime minister presses ahead with the privatization of public services as a reform agenda, he faces growing resistance from unionized workers and his own party.

A recent survey revealed that the gap between the rich and the poor grew longer under the left-wing prime minister, who has been spearheading the right-wing reform.

The rise of the euro against the dollar, which hit a record-high 1.19 dollars, suggests that the euro has taken root as an established currency not to be extirpated any time soon.

However, this can deal a blow to export competitiveness. The European Central Bank (ECB) said that the trade surplus in the first quarter of this year fell to 14.3 euros, down by half from the same period last year. “With the sluggish and vulnerable economy, a rising euro is fatal,” said one German professor.

Jei-Gyoon Park phark@donga.com