That leaves some 8bn Ecus a year to be financed by Mr Delors's proposed Union bonds, a facility that would enable the EU to take advantage of the triple-A credit rating of most of its members. With all respect to the Chancellor, Kenneth Clarke, an extra demand on Europe-wide capital markets of pounds 6bn a year is unlikely to raise long-term interest rates.
After all, the British government is planning to push up its own borrowing from pounds 37bn in 1992-3 to nearly pounds 50bn in 1993-4, twice as much as that proposed by Mr Delors for the entire European Union. But British 10-year interest rates have fallen from more than 8 per cent at the beginning of this year to only a little more than 6 per cent. Both real and nominal long- bond yields are dropping because of depressed private-sector demand, high savings and falling expectations of inflation.
That Mr Delors should be acquitted of a conspiracy to raise British interest rates does not, though, mean that he is innocent of all other charges. The Commission's white paper on Growth, Competitiveness and Employment is an improvement on an earlier version, but it is nevertheless hastily prepared, inconsistent and based on flawed logic. What faith are we to put in a supposedly competent bureaucracy that tells us in one part of a document that 17 million Europeans are out of work, and in another that there are almost 16 million European unemployed?
This broad-brush approach to figures does not inspire confidence that the long list of projects that Mr Delors would like to fund - including the high-speed rail link 'from London to Paris-Brussels- Cologne-Amsterdam' (estimated cost 8.5bn Ecus) and a 'Dublin- Birmingham-Cambridge' road (costing a nice round 1bn Ecus) - would deliver a rate of return above some notional target rate, possibly quantifying social costs and benefits. This looks instead like the sort of wishful thinking that landed us with Concorde.
The proposals for trans-European energy networks also have an unrealistic feel, since there is not going to be a European market in electricity or gas as long as there are large state-owned monopoly suppliers in most of the member states. The EU is still a long way from even the imperfectly competitive arrangements being introduced in Britain, under which large customers can shop around for different gas and electricity suppliers.
There is also a lurking interventionism in much of the Commission's thinking. There may be many things that governments or the Commission could do that would promote Europe's involvement in the brave new world of multi-media, including work on common standards and seedcorn research. But the reason why Britain is ahead of most other member states in this area is that we have a relatively free and unregulated regime, unencumbered by a slow- moving state telephone monopoly.
The overall impression of the White Paper, though, is of muddle. It seems unlikely that any single person has bothered to read it from beginning to end. This document has evidently been produced by a number of different hands at great speed without the guidance of an overall intelligence. It is rather as if each member of the London Symphony Orchestra had been told to improvise on any score they preferred, and never mind the absence of a conductor. The result is cacophony.
One section of the document admirably rehearses some sound arguments why it would be sensible to make European labour markets more flexible, so that higher growth would feed more rapidly into more jobs. It proposes reducing the non-wage costs of employment by 1 to 2 percentage points of GDP, with particular weighting towards the unskilled. The Commission says (although, again, the numbers look suspiciously rounded) that tax and social security costs account for more than 40 per cent of overall labour costs in the Community, compared with 20 per cent in Japan and 30 per cent in the United States. So this makes a good deal of sense.
But another section of the White Paper dallies with the notion that there is technological unemployment, created because labour-saving technical progress is moving more quickly than our capacity to anticipate new needs and products. This was clearly written by an Armani-suited Eurocrat who has never walked round the streets of Brussels, let alone Moss Side or Hackney. There is no more risk of sating wants today than there was when our forebears were faced with other great technological leaps into the railway age, the electricity age, or Fordist mass production. The main problem is whether the people who want and need things have the wherewithal to buy them.
The same fallacy, that there is a fixed amount of work to do, underlies the proposals behind work- sharing and shorter working hours. There is everything right with work-sharing and shorter working hours if they arise from what people want, but there is no economic reason for encouraging people to work shorter hours as a way of reducing unemployment.
There are essentially two types of unemployment, a cyclical element that can be reduced as growth picks up and a structural element that arises from a mismatch between vacancies and the unemployed, or from employers' distrust of the long-term unemployed, or from other such longer- run factors.
If unemployment includes a cyclical element - if it is above the rate at which wage settlements for those in work are stable or falling - then it is perfectly possible to reduce it by stimulating the economy through increased public spending, tax cuts or interest rate reductions. People can then have a choice between higher incomes or shorter hours: it does not have to be forced on them.
But if there is no cyclical unemployment - if unemployment is below the level at which wage demands, costs and inflation begin to accelerate - then no amount of work-sharing will reduce it further. The Government simply has to offset any work-creation measure with tougher economic policies that will throw other people out of work. In these circumstances, the only solution is to chip away at the structural causes of unemployment: to provide incentives to employers to hire the long-term unemployed; to train people for the vacancies; and so on. Work- sharing will not help.
The key issue of how much of Europe's unemployment is cyclical - in other words, amenable to easier interest rate and fiscal policies - is dodged by the Commission presumably because it is far too politically embarrassing. The high German interest rates imposed by the reunification boom, together with the European exchange rate mechanism that transmitted those interest rates from Germany to other countries as well, are the principal causes of the European recession, but you will not catch Mr Delors saying so.
European governments have already relied quite heavily on fiscal policy - tax cuts and increases in public spending - to compensate for their excessively tight monetary policies. Government budget deficits have risen sharply across Europe, and are now at relatively high levels, as the bar chart shows. That is why the proper response to the European recession is not necessarily to spend more or tax less, but to cut interest rates.
Real interest rates - after allowing for inflation - are still far too high. The reluctance of the French, Italian and other governments to allow their currencies to float down a little against the mark means that real interest rates are higher in some low-inflation countries (like France) than they are in Germany itself, which still suffers from the vestiges of its inflation problem. Mr Delors and the Commission would serve Europe's unemployed best by starting to tell a few home truths.Reuse content