Posted Sunday, June 1, 2003; 14.38BST
Such red tape, say employers' organizations and some economists, helps explain why companies in Germany, France and other Continental European nations are so reluctant to invest and hire new workers at home. Not so fast, say labor unions and other economists, who believe the fault lies elsewhere — with overly restrictive government fiscal policies and tight monetary conditions imposed by the European Central Bank that are choking growth. Jean-Paul Fitoussi, a prominent French economist, says "logic dictates that you would cut taxes in a recession and cut public spending in a period of growth. But we're doing the opposite. That limits growth and makes the slowdown last longer."

Not all European countries are affected equally. Britain likes to contrast its less regulated economy — including more flexible hiring and firing rules — with those on the Continent to explain why U.K. unemployment is at 5% of the labor force compared with almost 9% in Germany and 9% in France. But not even the U.K. has been spared the longer-term decline common to the rest of Europe. Although its economy sped up during the 1980s, per capita growth fell back in the 1990s to the same rate of the 1970s, and is now barely higher than the E.U. long-term average, according to O.E.C.D. statistics.

Union bosses are caught in the middle of the argument. Michael Sommer, the head of the German Trade Union Federation, which has been battling Chancellor Gerhard Schröder's efforts to overhaul labor-protection rules and reduce social-security costs, declared last week that the original program had been defanged to his satisfaction. But he added: "It's not clear that the government has understood the seriousness of the situation. It needs to start an active economic policy, or else the nation will be driven further into crisis." Even militant French unions see the current system needs an overhaul; there simply aren't enough younger people to continue paying for the retirement of their parents' generation. And yet they march. It's not just union members who feel this conflict. A recent poll in Le Monde shows that 80% of French people see financing their pensions as a serious problem that needs to be tackled urgently. But 49% support the unions' stance.

Marion Uteza, a Paris elementary-school teacher, epitomizes this straddle. Marching in a mass demonstration through Paris late last month with her 5-year-old daughter and a handwritten sign proclaiming no to an american-style society, she acknowledged the inevitability of changing the pension system. It was the details of the government's plans she didn't like. "Surely it must be possible to reform pensions without destroying the system," Uteza said.

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