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Desperately Seeking European Leadership


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DESPERATELY SEEKING EUROPEAN LEADERSHIP

Airline employees shut down French airports to protest downsizing. Workers riot in Italy to halt closure of an inefficient chemical plant. German steelworkers brace for a showdown with management. Signs are everywhere that a winter of discontent has come early to Europe, an economic storm mixing recession and corporate restructuring (page 50).

All across the European Community, there has been paltry political leadership in coming to terms with what lies at the heart of much of the region's strife--lagging productivity. European leaders clutch at the tattered Maastricht treaty as if it were a talisman against the forces of worldwide competition.

In this time of discontent, French Prime Minister Edouard Balladur took power with the promise of filling Europe's leadership void. With hard-won gains against inflation and labor excesses as a foundation, Balladur was poised to establish France as Europe's leader in an open world economy.

Sadly, Balladur has instead become a master of retreat. Privatizations of state-owned companies now have limits on foreign ownership. Calls for a global trade accord have now become demands for protecting agriculture and the entertainment industry. A chance to restructure Air France may now be lost.

A new report compiled by McKinsey & Co. highlights Europe's dilemma. In measuring labor productivity in nine key industries, McKinsey found Japan leading in five and the U.S. in four. Germany, Europe's technological leader, leads in none, including autos. One explanation: German innovation has suffered because its companies have tended to compete regionally, within Europe, rather than globally.

European politicians must step forward and provide new leadership to compete in the global economy. If they don't, Europe will be enveloped in labor unrest, protectionism, and decline.


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