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Well, I live in Germany and I must say that most of the Germans have already decided the issue and chosen that a dictatorship is a good way to go, or as they call it the "Große Koalition" (Big Coalition).

The remains of what one could call a free market, are still competitive and are providing jobs as long as they are in niche markets where they can built on their first-rate products.
However, this will only serve a minority of the Germans and most likely only high-skilled labor.

I lived in Germany from 2002 to 2005 and got the impression that attitudes are changing. To say that "no one" in Europe gets it is surely not correct. And with Germany's continuing very good performance as an exporter, surely the talk of an "abyss" is also a little overblown. But you do wonder where Germany will end up unless general attitudes toward the market and risk-taking change. In Germany this change in attitudes is certainly going to need to realized from the top down, and this will require a major politician who is prepared to push hard for a free(er) market. With Ludwig Erhard, Germany has already produced at least one of them since the War. As I see it, it just needs to produce another one. German reform would certainly drive reform elsewhere in Europe. Many Eastern Europeans certainly already get it, and competition (including tax competition) from these countries will help drive change too.

I think you are being a little too pessimistic Frederic (I hope). In my recent trips to La Belle France, I was surprised at how dismissive of the French economy so many of my French colleagues were. They were all suffused with the view that things were hopeless.

But the feeling seems more analogous to the East bloc in the early 1980s. None of the Nomenklatura truly believed in communism, but all were clinging to the system to get their piece of the pie. I think a crack or crash could come anytime. But whether it will be reformist, catastrophic, revisionist or merely cathartic is unclear.

I think that there is some light at the end of a very long tunnel. Tony Blair has at least been attempting to convince other European leaders to reform economic policy (notably CAP) and Angela Merkel brings some promise with her admiration of Thatcher's free market policies. I think it is the structure of the EC that is the problem rather than a problem with the general public. They have become disenfranchised by the political process which is incredibly slow to move forward due to competing priorities. To paraphrase Jean-Francois Reveel, Europe is like an orchestra in which every member wants to be the lead violin. Until that changes, and policies like the CAP and restrictive labour protection continue, Europe will continue to lag behind the USA.

Had dinner with a Swiss friend last night. (I'm American.)

He said that until he took some finance classes at NYU, he didn't really understand the advantages that American-style capitalism conferred on markets.

He told me that many Europeans are of the mind that Americans do things one way, and Europeans do things another, and, in the end, neither region has any real advantage over the other.

Now that he sees the light, he thinkg that it will be impossible for Europe to come to terms with its economic and labor problems until their economies face the brink of systemic failure.

you always do well as an exporter when you are growing slower than the rest of the world.

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