Europe's Big Bust Robert J. Samuelson  
We can Ieain something from Europe's big bust. It wasn't supposed to happen. By now, ÛÏEC 92ÛÛÓthe European CommunityÛªs latest lunge at creating a vast single marketÛÓwas supposed to have ignited an explosion of new jobs and investment. Instead. Europe is in deep recession. The jobless rate is near 11 percent and headed higher. Europe's distress is one of the great disappointments of the post-Cofd War world)</br></br>Overseeing weak economies, Europe's governments are insecure and passive. Preoccupied with domestic troubles, they havenÛªt provided much leadership on anything, from war in the former Yugoslavia to the turmoil in Russia. EuropeÛªs slump is also hurting our recovery, because Europe buys about a quarter of U.S. exports. But beyond these specific problems, EuropeÛªs faltering economy also provides an object lesson for Americans.</br></br>To many, Europe's welfare states represent a model worth emulating. Please, look again. Their very protectiveness and generosity are self-defeating. ThereÛªs a vicious drde. The combination of rigid wages and generous welfare benefits hampers economic growth; which raises welfare spendingÛÓwhich hampers;.growth. Sooner or later, the system buckles under its own weight. ThatÛªs happening now. All of Europe faces rising social pressures from economic stagnation and big budget deficits.</br></br>To be fair, the immediate cause of EuropeÛªs slump is high German interest rates. These were rased in 1990 to combat inflation cansed by huge spending on German reunification. Unfortunately, Europe's fixed exchange-rate system forced other countries to adopt GermanyÛªs hrigh interest rates. (Countries that keep their currencies locked together must have similar interest rates. Otherwise, massive amounts of money would flow to any country with higher rates.) The effect has been devastating.</br></br>High interest rates may have been needed in Germany, but elsewhere they have simply suffocated economic growth. ÛÏWe donÛªt see any reason for a strong recovery in 1994,Û says British economist Nigel Gault of the consulting service DRI in London.