Europe's economy continues in deep economic trouble, with absolute stagnation this year followed by no more than 2 percent growth in the four major countries in 1982. If this forecast proves accurate, it more or less assures an unemployment total of 10 million, 40 percent of whom will be under age 25.
By mid-1983, according to a report made last week by the Paris-based Organization for Economic Cooperation and Development, the jobless rate in Western Europe will soar to 10 percent of the labor force, well over jobless rates here and elsewhere in the industrial world.
A particularly worry, the OECD notes, is that spells of European unemployment are getting longer and longer. As against less than 11 percent of unemployed Americans who were out of jobs six months or longer during 1980 (a figure that might go to 17 percent this year) the comparable number in England is 40 percent. In the Netherlands, the proportion is 49 percent. Belgium, Spain and Turkey are having similar problems.
It's hard to make it sound more grim than it is and, indeed, U.S. officials who recently have returned from visits with their European counterparts are uniformly depressed by what they find.
For example, Robert D. Hormats, assistant secretary of State for economic and business affairs, back from Brussels, says that "prolonged economic stagnation has brought political uncertainty and weakened governments. In short, Europe appears to be losing confidence in itself and its future."
Particularly worrisome, as one reads between the lines of the OECD report, is the certainty of low growth in the 1980s, a precursor of social tensions. No one can see how to regain the magic touch that enabled Europe to achieve 5 percent real growth rates in the 1960s, prior to the first oil shock, or even the 3 1/2 percent averages achieved in some years of the 1970s.
The record and prospect for growth of OECD Europe, so far in the 1980s, is as follows: 1980, 1 percent; 1981 estimate, minus 0.25 percent; 1982 projection, 1 1/2 percent; and 1983 projection, 2 3/4 percent. With such a prescription, the labor force grows, but there aren't enough jobs created to soak up all the bodies.
Meanwhile, the United States, now in a recession, is expected to recover more firmly than Europe at the end of next year and to wind up with at least a 3 percent real growth rate in 1983 (the Reagan administration counts on a lot more than that), while Japan moves on to a growth rate around the 5 percent mark.
Why is Europe in such a mess? Hormats cites protection of inefficient, labor-intensive industries. Also, the old countries were hit by the "baby boom" about a decade after it was felt in North America, boosting the youth component of the labor force at the precise moment that the two OPEC oil shocks had their cumulative effect. To mitigate the inflationary impact of soaring oil prices, Europe was forced into following restrictive fiscal and monetary policies that slowed the growth process.
Then there is the American fixation on monetary policy as the only anti-inflation weapon, which in the past year brought interest rates to the highest level "since Jesus Christ," as West German Chancellor Helmut Schmidt said at the Ottawa summit. French Finance Minister Jacques Delors has referred to high American interest rates as "the third oil shock." In a sense, then, Europe has been whipsawed by OPEC and the United States.
And superimposed on the fragile economic fabric is the constant fear that Europe will get caught in the superpower nutcracker, and once again become a battlefield of death and destruction. This past week's ominous events in Poland surely haven't added to Europe's serenity.
Perhaps the most worrisome aspect is that nobody in Europe seems to know what to do about the generating crisis. Nothing put on the table at OECD meetings in Paris, or in the cloistered halls of the Bank for International Settlements at Basle, pretends to offer any solutions.
At a press conference in Paris, Sylvia Ostry of Canada, chief economist for the past year for the OECD, said with the caution that befits an international civil servant: "We can't honestly say we have any easy answers any more." More directly, Oxford University professor Peter Oppenheimer observed: "We're in a state of intellectual bankruptcy. All we know is that there isn't any single economic formula that will do the trick."
Helen Junz, international economist for Townsend-Greenspan Inc., takes a slightly less gloomy view. She sees Germany beginning an export-based revival, and Great Britain beginning to come out of its inflationary problem, although at a frightful cost in jobs. Also, she sees a fair amount of European investment going into new plants that should boost productivity. Significantly, Europe so far seems to be proving that it can live--politically--with higher unemployment rates than once were deemed possible. But even Junz admits "there are high possibilities for something to go wrong."