THE RECESSION hangs dismally on in western Europe. The recovery there is even slower than in this country. Unemployment remains high with no immediate prospect of significant reductions - which suggests that we have not yet seen the full political impact of this long hiatus in Europe's accustomed pattern of rapid growth. As for the United States, the low level of world trade is now affecting the way our economy is working here at home.
The strongest of the European economies, West Germany's, continues to run tremendous trade surpluses that have heavily depressing effects on its neighbors. lart year the Germans exported some $14 billion worth of goods more than they imported. The rest of Europe not to remain the United States, now wants the Germans will buy more of other people's products. The Germans are resisting. They have their inflation rate down to 4 per cent a year, a triumph of national willpower, and they regard the foreign pressure to reflate as merely an invitation to join the extremely dangerous experiments now going on in the other big Western European countries. Inflation in France is around 9 per cent a uear, in Britain 16 per cent, in Italy 22 per cent - and in the latter two the rate is currently again.
But it's also true that Germany's present policy, which is to sit tight, continues to make things worse sponds by throwing up its hands and saying: Look, it isn't our fault if Germans work harder than other people maintain high str people of quality and deliver on time. Germany isn't doing anything illicit, like fiddling with the currency exchange rate, to protect that trade surplus. But German industry is formidably competitive, and the surplus is a burden to the rest of Europe.
Western Europe is, roughly speaking, divided into two zones. There's a broad band running from Scandinavia down through Germany and Switzerland to Austria in which policy is tightly focused on controlling inflation. Politics there tend to be centrist and intensely cautious, not to say stalemated.To the west, both inflation and recession are far more severe and the political balance is far less stable. Things seem to be buildding toward the French parliamentary elections in the spring of 1978. That's a long way off, but this year's economic performance sets the atmosphere for next year's voting. The United States can't do a great deal about it; the dominant economy for Europeans now is West Germany's. When Vice President Mondale was in Europe last month he had a try at persuading the Germans to loosen up and lift demand a little. He didn't get far.
The American position is that a solid recovery for the worldwide economy requires sustained and cooperative leadership from the three most powerful and stable of the trading nations - the United States, Japan and Germany. But this week Sen. Frank Church's subcommittee on foreign economic policy published in incisive study of Europe's upromising situation, warning that any hopes for an early change in Germany's position were going to be disappointed. The implications not only for Europeans but for Americans are decidedly somber.
You may remember that the American economy expanded much more slowly, late last year, than most people had expected. You could see the effects in the unemployment rise. The standard explantion of that unpleasant surprise involved business inventories. But there was another reason that is beginning to draw serious attention in Congress. The Senate Budget Committee recently observed that this disappointing record was also due to "extremely weak exports resulting from the slowdown in the international economy." If that slowdown stays slow, it would be foolish to think that Americans will be exempt from itsconsequences.