Saturday, April 15, 2006

After this week's extremely close election in Italy, there is a strong sense in Europe that, because of weak governments and divided publics, the Continent's big three countries are unable to make the economic changes that most political leaders agree are essential for restoring growth.

"Everybody in Europe agrees that things can't go on the way they are going," said Wolfgang Nowak, a German economist who is in charge of the Deutsche Bank's International Forum. He was speaking about the near-zero-growth economies with high deficits, rigid labor markets and intractable levels of unemployment and social welfare budgets that are increasingly difficult to afford.

"Everybody wants change," Mr. Nowak continued. "At the same time, everybody does everything so that things don't change."

At stake, in the view of many European experts, is the ability of countries like the big three — Germany, France and Italy — to adapt to a globalized world in which Europe's high labor costs and low population growth could portend a long-term decline, not just of economic power but of political influence as well.

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