Leading Article: Germany inches along the modernisers' road

Tuesday 03 August 1999 23:02

THE EUROSCEPTICS' united front is united no longer. Conrad Black, owner of The Daily Telegraph, has until now been a rallying point for the Eurosceptics - arguably second in influence only to his fellow-tycoon, Rupert Murdoch. Now Mr Black indicates that it is "time to rethink Europe". He talks of a "Damascene conversion" of the German government to the virtues of the free market. The truly Damascene conversion may be Mr Black's own.

Chancellor Gerhard Schroder faces problems within his own party. Like Tony Blair, he can cope with that. Meanwhile, Mr Schroder finds himself an international darling - praised by the usually cautious Wall Street Journal for the changes he wants to introduce.

Mr Schroder's government is, in effect, picking up where Helmut Kohl's conservative administration left off in attempting to bring Germany's public spending under control. Germany has some of the highest labour costs in the world, and a uniquely generous welfare system. Increasingly, Germans see the connection between high costs and high unemployment.

Germany is slow to change direction. But when changes are under way, the political consensus assures their durability. Liberalising reforms may also be easier to force through at a time when the German economy - whose imminent collapse has been predicted at regular intervals in recent years - is again looking set for recovery. Meanwhile, the euro, whose performance was so sickly during its first six months, has perked up considerably.

Germany has successfully adapted to uncomfortable new realities before, and is likely to do so again. With a strong Germany and a strong euro in prospect, for Britain to remain on the sidelines now would be counter- productive as never before.

Mr Black argues for a harmonisation that "could take the form of the Thatcherisation of Europe". Put like that, few European leaders would be ready to sign up. A gentle version of Thatcherisation - where privatisation is seen as an opportunity, not a threat - is, however, already taking place across Europe. The powerful Mr Black has noticed the change. The less powerful and still fervently Eurosceptic William Hague? Not yet.

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