Is it fair to point the blame for the EU's poor international competitiveness at inflexible labour markets, regulated goods and services markets and a general lack of competition?

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pohnpei397's profile pic

Posted on (Answer #1)

While these are not the only things that have made the European Union (EU) struggle to be competitive internationally, they are certainly part of the problem. 

We must not forget that a significant part of the EU’s competitiveness problem has to do with the rest of the world rather than with the EU.  The rise of China and other sources of lower-cost labor has certainly played a major role in reducing EU competitiveness.  The fact that the competitiveness of the US, Japan, and other “first world” nations has fallen off shows that the problem is not confined to the EU. 

However, it does appear that these problems of excessive governmental regulation do have a part to play in reducing the EU’s competitiveness.  Perhaps the best proof of this comes from some differences between the various countries of the EU.  For example, the biggest problems seem to be in the countries with the greatest degree of regulation.  The labor laws of Spain are much more strict than those of Germany and Germany has managed to remain much more competitive than Spain.  Greek laws do much more to prevent competition within their society (doing things like limiting the numbers of people who can participate in certain professions) than do those of the UK and the UK is much more competitive than Greece.

Thus, while it is by no means right to blame all of the EU’s problems on regulation, regulation does play a part in causing the EU’s relative lack of competitiveness.

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sjamil912's profile pic

Posted on (Reply #1)

Thanks very much.

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