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Jul 13, 2007

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Lars H.

The matter of whether the recovery of the European economy is here to stay is a very interesting one. However, recent numbers and polls for Germany indicate that it is slowly decreasing here.

Heiko Fassbender explains on the Atlantic Community today that more thorough reforms are needed. Do you also share the impression that the gap between the US and the EU is mainly due to Europeans' unwillingenss to work more?

For further reading: Don't Blame the Welfare State for US-EU Productivity Gap

Michael W. Kruse

Lars, thanks for the link.

My perception is that most of Europe is less friendly to entrepreneurship and overly limits creative destruction. Small businesses are the source of the majority of new jobs every year in the US. Eliminating barriers to starting businesses and to running businesses creates greater competition for lethargic existing businesses. However, businesses must also have the freedom to downsize or close in order to take advantage of changing opportunities. My perception is that much European regulation unduly hampers this ability.

Working more may be a part of the equation but I perceive that the bigger problem is (relative to the US environment) is an inability to adapt quickly and be dynamic. The trade off in becoming more dynamic is that any given job, company, or even sector becomes more vulnerable to creative destruction to make way for innovation.

What do you think? Do you think working harder is the answer?

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