View from City Road: The wider view of Europe's needs

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The Independent Online
The 40 knights of industry who sit at the European Round Table yesterday entered the debate over Europe's economic future with the directness of a medieval joust, brandishing an Excalibur in the shape of their Charter for Europe's Industrial Future.

In part it is designed to rattle Jacques Delors' suit of armour as he promotes the concept of social Europe. In part it is laying down some markers for the future.

The problem the charter addresses is an increasingly familiar and depressing one. Europe has become a high- cost, low-growth economy with too many out of work.

Their solution is also familiar. Europe must reduce wage costs, deregulate labour markets and unshackle employers from government red tape if it is to re-enter the virtuous circle of competitiveness, growth and jobs.

If the remedy stopped there it would be doomed to failure, since no matter how far Europe cuts wages to the bone and extends working hours it can never compete on costs with the likes of Taiwan.

Fortunately, it does not. The charter also recognises the need for Europe to raise skill levels to maintain the value-added gap our economies still enjoy with those of the developing world. The difficulty lies in achieving a balance between the two.

For that to happen a price must be paid. As yesterday's report acknowledges, deregulating labour markets and bringing down wage costs in order to create jobs is primarily of benefit to small businesses, for which the cost of employment may be prohibitively high.

None of the members of the European Round Table - Sir Denys Henderson of ICI, Edzard Reuter of Daimler- Benz and Jan Timmer of Philips, to take just three examples - could be said to be in charge of small businesses.

To foster employment and growth in the small business sector it may be necessary for a larger share of social costs to be carried by those interests represented on the European Round Table.