NCPA - National Center for Policy Analysis


December 17, 2004

Laws that discourage spending may be holding back European economic growth, writes Marcus Walker of the Wall Street Journal.

Generally, European governments use a myriad of red tape to induce savings and reduce consumption. For example, shops are required to close early to save staff from long hours; businesses are required make a comfortable profit on each item, limiting price competition; sales are allowed only during January and July.

The result is a continent that is characterized by high prices, short store hours, and very little consumer spending:

  • Residents of the 12 nations using the euro save 10.5 percent of their income; Americans save less than 1 percent.
  • This year, European consumption growth is 1.2 percent, as compared to 3.6 percent in the United States.
  • The average American spends more than $5,500 a year using credit cards; the equivalent figure for Germany is $64, and for France, just $30.

With such weak consumption in the euro-zone, its economic growth is stagnating, says Walker. The region's economy will likely grow by 1.1 percent from 2002 to 2004, compared to more than 3 percent for the U.S. economy.

Source: Marcus Walker, "Behind Slow Growth in Europe: Citizens' Tight Grip on Wallets," Wall Street Journal, December 10, 2004.

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