European laws restrict spending, economic growth

July 31, 2012

Free Market Foundation

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 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 to 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 characterised 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.

For text http://online.wsj.com/article/0,,SB110263584032796265-search,00.html

For more on International: Institutions and Growthhttp://www.ncpa.org/iss/int/

FMF Policy Bulletin/ 21 December 2004