Europe's 'locomotive' is losing steam

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GENEVA -- Europe's locomotive -- the term used to describe the joint economic clout of Germany and France -- is increasingly sputtering.

Unemployment and stagnation plague both countries, experts here say, while Britain, another large economy in the 25-nation European Union, shows growing wariness of EU pressure to put billions of dollars more into the euro coffers.

The additional funds are essential to keep the European Union's various projects on track, although they would cost the British taxpayer close to $10 billion over a seven-year period.

While German pressure groups eased their protests against dramatic cuts in unemployment benefits, in France millions have begun work stoppages against the conservative government's handling of the economic situation.

Taking part in what newspapers have dubbed "the long week" are doctors, teachers, railroad and telecommunications employees. The strikes are considered by many to be a prelude to organized opposition against adoption of the European Constitution.

The European Union's problems have had little impact so far on its spending pattern and the lavish salaries of the growing army of Brussels-based European functionaries. However, the meteoric rise in recent months of the euro, the currency of nine EU nations, against the dollar has cut into European exports and caused growing concern about economic prospects in the current year.

The European Commission's pressure on Britain to raise its annual contribution to the EU kitty above the 1 percent of the gross domestic product has increased the mood of "euroskepticism" in that country.

To the commission's warning that without more funds many EU projects would have to be scrapped, the Times of London reported: "The schemes that would be sacrificed are very much pet projects of Brussels; many are peripheral to the work of governments and companies."

Neither France nor Germany has been able to reduce unemployment, now reaching 10 percent of the labor force in both countries. Although French President Jacques Chirac spoke optimistically of a slight decrease of job seekers, he was promptly corrected by the conservative Le Figaro daily which pointed out that their number had actually increased.

A three-year economic slump in Germany came to an end in 2004, with 1.7 percent growth. But during the last quarter of 2004, French economic growth came to a standstill while officials embraced what one expert described as "a mixed bag of measures" to induce growth.

So far the French government has refrained from scrapping the 35-hour work week adopted by the previous socialist administrational and defended as sacrosanct by the labor unions.

The government has announced a 5 percent increased in the minimum wage in July and the possibility of tax breaks in the near future.

Meanwhile, Germany has been struggling with mass dissatisfaction following the adoption of a plan drafted by Peter Hartz, a former Volkswagen executive, dramatically reducing unemployment benefits.

Klaus Zimmermann of the German Institute for Economic Research, said bluntly: "The German state is broke, everyone has to make a contribution to recovery. Unemployment doesn't help anyone."

Thus the generous German program of welfare benefits came to a crashing end at the start of the year. An estimated 400,000 people stand to lose their payment entirely, and payments to 4 million others will be cut.

Under the new system, described by some as "a bureaucratic nightmare," benefits will be decided on the basis of the family's income and the length of the beneficiary's work. If the wife works and has a satisfactory factory income, she is expected to support her unemployed husband.

Those who received benefits equivalent to $3,100 monthly (the case of laid-off executives) will get half of that amount. The standard dole will be $455 a month in the more prosperous western part of Germany and somewhat less in the formerly communist eastern territories.