Europe’s problem isn’t deflation. The continent needs to fix its tight labor policies.

Europe’s problem isn’t deflation. The continent needs to fix its tight labor policies.

A relatively tight monetary policy is not the reason all European countries have been underperforming the U.S.

Europe’s biggest economies are weighed down by bloated social security systems and severely restricted labor markets. In Germany, retailers have been unable to persuade the government to allow stores to open on Sundays. In France, there’s the famous 35-hour workweek. In Italy, Prime Minister Matteo Renzi is only now pushing through legislation that would make it possible to fire workers who have open-ended contracts. In Spain, which has succeeded in driving down labor costs since the 2011 debt crisis, workers are still automatically entitled to 30 days annual vacation plus 12 paid public holidays — more than a typical U.S. employee gets after 20 years of loyal service.

If Europe wants more growth, it needs to emulate U.S. entrepreneurial ruthlessness, not its monetary gimmicks.

http://www.bloombergview.com/articles/2014-12-23/deflation-isnt-whats-holding-europe-back

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