Analysis-Grievances mount in Europe with future wealth in doubt
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[April 04, 2023] By
Mark John
(Reuters) - In separate speeches last year, the leaders of France and
Germany warned their citizens of hard times ahead as the global economy
encountered challenges ranging from trade conflicts through to all-out
war.
French President Emmanuel Macron declared the "age of abundance" over;
for Germany's Olaf Scholz, three decades of unfettered free trade that
had delivered strong economic growth with low inflation were now drawing
to a close.
But if the aim was to prepare their publics for future sacrifices, their
messages have fallen on deaf ears - as shown by the biggest German
strikes over pay in decades and widespread French anger at Macron's plan
to raise the retirement age.
Instead, the protests suggest many Europeans have concluded that if the
economic pie is shrinking, then what lies ahead is a fight to prevent
their share getting even smaller.
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"If someone has to pay the cost, then people are fighting to not have to
pay the cost," said Gregory Claeys, a senior fellow specialising in
economic governance and public policy at Brussels-based economic think
tank Bruegel.
From the growing expense of caring for ageing populations and tackling
climate change to the knock-on impacts of military and trade conflicts,
many of Europe's problems are similar to those facing all industrialised
economies.
But they pose more immediate challenges to a region which funds
extensive welfare states, prides itself on being the world's largest
trading bloc, and whose over-reliance on Russia for fossil fuel-based
energy was exposed by the Ukraine war.
That year-old conflict, the COVID-19 pandemic and an inflation-fuelled
cost of living crisis have now brought things to a head.
While many low-income U.S. workers discovered that post-lockdown labour
shortages gave them leverage to negotiate solid wage increases, European
workers initially prioritised job security over higher pay.
France, Germany and other European countries offset some of the strain
on households with generous furlough schemes, followed up with a range
of support measures to help consumers cope with inflation and, above
all, surging prices for fuel.
It has since become clearer that many companies were meanwhile
rebuilding their margins on price hikes in a way that was exacerbating
inflation - something policymakers at the European Central Bank now
acknowledge.
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ALL IN IT TOGETHER?
Such support schemes cost the public purse, inflaming budget deficits
and making governments less willing to grant hefty pay increases to the
public sector workers now leading industrial action in Germany, Britain
and elsewhere.
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![](../images/040423PIX/busine65.jpg)
Demonstrators hold signs at a march
against the government's pension reform plan in Paris, France, March
11, 2023. REUTERS/Benoit Tessier/File Photo
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"I do think there is a growing awareness that low-income earners
have fallen further behind and that the wage gap in Germany has been
widening," said Carsten Brzeski, chief economist for bank ING
Germany, adding he saw "increasing tensions" between low- and
high-earners across Europe.
The untargeted nature of some of the measures brought in to
alleviate inflation - for example France's blanket subsidies on fuel
at the petrol pump - in some cases benefited comfortably-off
consumers more than those struggling to get by.
Meanwhile the bump in corporate profits and shareholder gains
started to aggravate a sense of inequality.
"The mantra that we are all in it together is blatantly untrue and
workers are not going to put up with that kind of rhetoric," said
Owen Tudor, deputy head of the International Trade Union
Confederation.
Tudor, echoing union arguments across the region, insists Europe
generates enough wealth to sustain comprehensive pension systems and
prevent public sector wages from sliding behind inflation - as long
as governments take the political step of redistributing that
wealth, for example through tax increases.
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Few have proven ready to do so in recent years for fear of electoral
defeat. The other option - allowing debt to rise further - looks
tricky: European Union limits on deficits that were suspended after
the pandemic will re-apply from 2024.
More strikes loom in Germany unless arbitration efforts make
progress, and French walkouts that are hitting refineries and other
parts of the economy continue to see strong public support, with a
new national day of protest set for April 6.
The Macron and Scholz governments are seeking ways to allay the
grievances, with Macron in particular suffering damage to his
already weak personal popularity.
If the discontent grows, more radical parties increasingly see an
opportunity to profit - particularly in France, where Macron's rise
to power in 2017 at the head of a new centrist movement came at the
expense of established parties.
"Macron has eaten the centre-left and the centre-right," said
Bruegel's Claeys. "The only alternative that people might have is
the extreme-right."
(Additional reporting by Sarah Marsh in Berlin and Leigh Thomas in
Paris; Writing by Mark John; Editing by Catherine Evans)
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