Michael Brandl > Macro Updates > Archives > June 1, 2003

June 16, 2003

Are you too old and feeble to work at age 60? You are if you are French. Or at least that is what the French unions are telling the French government. For about the past week and a half the French unions have been up in arms over the French government’s pension plan reforms that may require French workers to work past age 60. A representative from the French postal workers union stated in a television interview that at age 60 a person is simply too old to sort mail. Hmm. This is the same French workforce that recently had the definition of a workweek changed from 40 hours a week to 35 hours a week. I won’t even bring up their over six weeks of mandatory vacation each week, nor all of the ‘bank’ holiday days they get off of work.

An argument can be made that Americans go too far in the other direction: too much emphasis on work and not enough emphasis is placed on time with family, living a healthy lifestyle, etc., but you have to wonder about those French. If labor productivity is suffering, one needs to reduce costs in other areas in order to stay competitive, right? Maybe that’s why the French were so reluctant to get rid of Saddam? Did the French need his cheap/slave oil to compensate for their unproductive workers? Is that why the French are pushing so hard for the Iraqi people to accept the agreements Saddam made? I don’t have the answers, I’m just asking the questions. 

The Euro gets two thumbs up and one sideways. This past week saw people in both Poland and the Czech Republic vote in favor of their respective countries joining the Euro. Both economies need help. The Polish economy, which grew very nicely from 1994 to 1998, has suffered with anemic growth over the past two years. Poland needs to reform its inefficient agriculture sector and its heavy manufacturing sector needs investment. Both Poland the Czech Republic are suffering from weak economic growth as well as massive and growing government budget deficits. Did the people in these countries read the Growth and Stability Pact? Both countries are going to have to make some tough choices to get ready for Euro membership. Will it be worth it?

In England Chancellor of the Exchequer, Gordon Brown, told Parliament that it would not be worth it for England to join the Euro. Not yet anyway. He and PM Tony Blair stumbled all over themselves saying ‘not yet’ really means ‘very soon’ to Euro membership. Brown laid out why he thought England was not ready yet for the Euro, including failing to meet the “Five Economic Tests” the Treasury has put forward. From the Treasury’s web page http://assessment.treasury.gov.uk/page_01.html the five tests are:

The five economic tests

• Are business cycles and economic structures compatible so that we and others could live comfortably with euro interest rates on a permanent basis?
• If problems emerge is there sufficient flexibility to deal with them?
• Would joining EMU create better conditions for firms making long-term decisions to invest in Britain?
• What impact would entry into EMU have on the competitive position of the UK's financial services industry, particularly the City's wholesale markets?
• In summary, will joining EMU promote higher growth, stability and a lasting increase in jobs? 

Not yet the answer is so far. The Labour Party, and PM Blair, seems to continue to push Britain ever closer to Europe. It will be interesting to watch.