The major countries of Europe will be doing well if they manage to maintain their domestic standards of living this year and in the year or two to come.
The major countries of Europe will be doing well if they manage to maintain their domestic standards of living this year and in the year or two to come. That, at least, is the view of Britain's Prime Minister Mr. Harol??? Wilson, expressed in a speech in London last week.
He judged the position form a number of common factors which affect Britain as well as the other major industrial nations of Europe. The staggering rise in Arab oil prices, the increased cost of basic manufacturing commodities, inflated wage claims and disappointing productivity -- which means the failure of output to keep pace with costs.
In London, the barometer of the national well-being is reflected in the Stock Exchange, where business is done on a world-wide scale. The Financial Times index -- which averages the price of leading stocks -- was down this week to just below 250 points. Two years ago, it touched 500.
Yet London remains one of the cheaper cities of Europe in which to live, even though the rise in consumer prices over the last year was the second highest in the Common Market, at 13.5 per cent.
The highest increase was registered in Italy, where economic problems have emerged as a real threat to the nation's stability. Of all the countries in Europe, Italy has been worst affected by the oil crisis and this problem has been compounded by indecisive government and continual industrial disruption by striking workers. Prices in Italy shots up by over 16 per cent in the last year.
Food prices in italy are about one third more expensive than in Britain, while the cost of household items, for example, are about 15 per cent higher.
Holland, on the other hand, has managed to contain the worst excesses of inflation. While food prices are around 25 per cent dearer than in London, the average wage in Amsterdam is higher. This is one of the European countries with a balance of trade surplus, and this comparative wealth is evident by increased domestic sales of such items as yachts, cars and similar luxury goods.
Frankfurt is one of the most expensive cities in Europe. It costs more to live here than it does in New York, for instance. But the economic miracle which began in West Germany after the war has paved the way for the highest standard of living in Europe. West Germany has held inflation down to little more than 7 per cent -- half that of Britain -- and is the only oil-importing nation likely to show a balance of payments surplus at the and of this year.
Consequently, West Germans are the rich men of Europe. Their productivity is high -- which means they work well; which, in turn, means they live well, eat well, travel extensively and, of course, earn more than other Europeans.
The standard of living in France, too, is among the highest in industrial Europe. This is one of the few countries which has kept its industrial output rising in the past two years. Although retail prices in France have risen by over 13 per cent in a year, the Krench worker still lives well.
The world's economic experts have, in the past year, consistently forecast further inflation throughout Europe. Oil price increases have yet to bite fully into standards of living, and the recession in world trade is far from recovery.
But this week there has appeared a ray of hops for the industrial nations. World prices of basic raw materials have continued to drop and some economists suggest that inflation may now slow down, at the very least. But those raw materials are still over 50 per cent more expensive than they were last year, which means that the industrial nations are having to import inflation in order to keep production going.
So, even if the downward trend continues, Mr. Wilson's forecast that those nations who hold their present economic levels will be doing well, may be an accurate one.
SYNOPSIS: The London Stock Exchange ... barometer of Britain's economic condition. This year, millions have been wiped off share prices, reflecting an economic slowdown which is shared by most European nations. Prime Minister Harold Wilson recently warned that if they industrial nations maintain only their present living standards in the next two years, they will be doing well.
The savage increase in Arab oil prices has hit all Europe, but has hit Italy hardest of all. Already best with the highest consumer price increases in Europe, Italy faces a grave financial crisis which threatens its future stability.
Food prices are already something like a third more than in Britain, but the real question surrounding the Italian economy is whether it can ever recover form its disastrous balance of payments situation and cope with a increasing wage rate, now increased by twenty-two per cent in a year. Italy has now borrowed everything it can borrow, with the result that the government has had to cut back on all consumer spending.
The Dutch, on the other hand, have managed to contain inflation to less than ten per cent. Food prices in Holland are roughly twenty-five per cent more expensive than in Britain -- which is still the cheapest country in which to live -- but wages are higher. This is one of the European nations with a balance of trade surplus and its comparative wealth is reflected in the demand for yachts, cars and other luxury goods, now booming in Holland.