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Saturday, May 05, 2012

Thoma quotes an ignorant German. I refrain from racist insults ("Waldmann" is Austrian not German).

The line is that Germany has made it easy for firms to hire and fire (while gradfathering the job security protection for the middle class middle aged). That this explains why their economy is performing so differently from those of Spain and Italy, but it is a high price in solidarity to pay for low unemployment.


I live in Italy and I am totally unconvinced by the premise of the essay. Italy is full of contract workers (though not at the gigantic level of Spain before the crisis). The old system of employment security was strongly relaxed for new hires by the first Prodi government 1997 IIRC. Spain's still more strict restrictions on layoffs were relaxed under Suarez (you know the guy who became prime minister soon after Franco died). Again IIRC there was a time when 35% of Spanish workers were contract workers, by far the highest proportion in old Europe.

If labor market reforms caused Germany to grow, then Spain would be booming.

The problem is that German's are powerful and ignorant about what happens outside of their country (and yes for a US citizen to type that is the height of irony). They are sure that Spain ran huge deficits when it had budget surpluses and ran up a debt to GDP ratio much higher that Germany's when it was roughly half as high. Finally they recommend that Italy and Spain follow Germany by doing what Gemany did many years after they did it.

I must stop typing before I get really rude.

1 comment:

Jonathan Hopkin said...

The biggest liberalisation was in 1984 (Gonzalez, not Suarez). Sure that most Spanish workers totally unprotected, but protections for permanent contracts are effectively the highest in Europe (we'll see if last month's reform changes this).
The real difference between Spanish and German labour markets is bargaining arrangements.