European Economic Growth Returns - What are the Europeans Finally Doing Right?

The European economy continues to subtle moves towards a unified and impressive economic growth make. Improving economic performance is tied in part to strong global economic growth. It is also more work flexibility across the continent connected than they were a few years ago. The recent policy to the right in France suggests that the French economy would show signs of growth in the coming years than the broad expectation that aPrevious year.

European economic growth in 2006 was the strongest of the last six years. The broader 27-nation European Union, the cover down in real terms (adjusted for inflation) economic growth in 2006 of 3.0%. The 13 states with the euro in the past year saw a real growth of 2.7%.

Growth forecasts for 2007 adopted by the European Commission - the executive arm of the European Union - see the real growth was 2.9% for the Greater Europe, with the euro nationsSee growth of 2.6%. In both cases, the growth rates would probably be greater than those found in the U.S.

Broad unemployment in Europe was 7.2% in March 2007, the lowest since the records of 14 years. In comparison, unemployment in the U.S. is currently 4.5%.

European growth forecasts for 2008 are somewhat weaker than the expectations for this year. To the contrary, most U.S. forecasts for 2008 real growth again in the vicinity of 3.0%.

Several export-dependent European nations, especially the Germans,are benefiting from strong global economic growth and rising demand for exports. While the stronger euro currency could, in theory, depress European exports, such a development has yet to occur.

Deja Vu

By certain measures, the European economy is similar to where the U.S. economy was 2-3 years ago. Beginning in June 2004, the Federal Reserve--America's central bank--began a lengthy process of monetary tightening in order to minimize inflation pressures tied to solid U.S. economic growth. Such a program is now underway in Europe.

The European Central Bank (ECB) has boosted its key short-term interest rate seven times since December 2005. The ECB announced recently that another 0.25% tightening move would occur in June, pushing the rate to 4.00%. In addition, the Bank of England...yes, that nation's central bank...boosted its key rate to 5.50% recently, a six-year high. The Bank noted strong U.K. economic growth and high Level of business investment as its justification.

Many economists see an additional move or two days before the end of the year. In contrast, America's most important short-term rate is at 5.25% since the end of June 2006 has been moved after 17 tightening, with many fortune-tellers, including yours truly, see a chance for light-Fed facility in late 2007.

Labor Flexibility

So what are the Europeans finally do, right? In addition, an increase of strong global growth, the Germans, theSpaniards, and others have introduced greater flexibility in their working economies. As a result, several European companies are more willing to hire at home, compared to current recruitment and relocation of jobs to Eastern Europe.

Moreover, the recent French election is French for economic competitiveness, but it is expected a bumpy ride. The choice of the prior pro-America, for the free market President Nicolas Sarkozy proposed that the French are finally bows to the realities of the 21st Centuryglobal competition.

This was not the case in the past quarter century as a French leaders saw the French "on" things to do to their way. Double-digit unemployment and limited job opportunities for millions of young people in recent years, finally, the attention of the electorate.