Europe’s unpopular governments: Reluctant reformers

European leaders need to make a better case for reform

ACROSS the continent, Europe's voters are posing a conundrum for their governments. Most Europeans now accept, as a general proposition, that if their economies are to return to faster growth, and unemployment is to be cut, their bloated pension, welfare and health-care systems, and their rigid labour-market regulations, all need fairly radical reform. Yet at national or local elections they are proving quick to punish governments that put forward any specific proposals that would inflict pain.

The latest example is France, where the ruling centre-right party was mauled by the left in last weekend's regional elections. But governments of the left that have tried reforms have suffered as well. Germany's Gerhard Schroder has just been forced to step down as party leader of the ruling Social Democrats, whose poll ratings are at an all-time low. Indeed, most European leaders, left or right, seem unusually unpopular just now. Poland's prime minister is quitting; Spanish and Greek voters have turfed out their governments; Italy has just seen yet another general strike against reforms.

Governments everywhere tend to suffer mid-term blues. And French voters have formed the trying habit of turning against parties they supported barely a year or two earlier - a habit that now seems to be spreading to central Europe as well. The French president, Jacques Chirac, has reacted to his latest setback by reshuffling his cabinet. So far, it might just be politics as usual. But the disconnect between the necessity for reforms and voters' willingness to accept them could now threaten Europe's sickly economies with another turn for the worse.

The danger is that politicians may respond to electoral setbacks by slowing down the pace of change. Jean-Pierre Raffarin, who narrowly hung on to his job as French prime minister this week, declared after the regional vote that reforms would continue, because they had to. The choice of Nicolas Sarkozy to be the new French finance minister is promising: this hyperactive former interior minister is probably the nearest thing to a free-marketeer that the Raffarin government can find. Across the Rhine, Mr Schroder last week delivered a similar message to the German parliament about sticking to his Agenda 2010 reforms, despite party troubles. Italy's Silvio Berlusconi has also promised to hold to the reform path, including tax cuts, no matter how many strikes he has to face down.

The realisation around Europe that, as Margaret Thatcher once famously said, there is no alternative, is undoubtedly correct. But even if some reforms are inevitable, it is all too easy to water them down, or to postpone their introduction. A chastened Mr Schroder has already slowed the speed of reforms. However energetic Mr Sarkozy proves to be, his boss, Mr Chirac, has always been more of a political survivor than a genuine reformer. The same is true of Mr Berlusconi, who has put more emphasis on resolving his own legal problems than on reviving Italy's moribund economy.

Reluctant reformers might retort that, if Europe's people are unwilling to accept change, that should be their democratic right. So long as they are prepared to pay the price in sluggish growth and higher unemployment, why bother? Yet all the signs are that they are not happy to pay that price. The recent dissatisfaction with European governments is surely driven as much by grumpiness over continuing poor economic performance as by hostility to reforms.

True believers needed

Moreover, although few voters welcome painful changes - why would they? - experience shows that they can be persuaded of their necessity. In Britain, the-then Mrs Thatcher won two elections in the 1980s even as she pushed through tough reforms. In the 1990s, Dutch, Irish and Scandinavian governments were similarly re-elected - and their economies are now in better shape as a result. Admittedly, there were other reasons for these poll wins, and it was easier to make reforms when economies were growing; but that merely underlines the failure of France, Germany and Italy, in particular, to make changes during the good years of the late 1990s.

The lesson for the likes of Mr Chirac, Mr Schroder and Mr Berlusconi is clear: they must make a more convincing case of the need for change than they have done so far. Too often, they have themselves seemed to be reluctant reformers. So it is not surprising that their electorates have copied them. True believers can prove surprisingly persuasive - especially if they have a good case to sell.

Article argues that if Member States' economies are to return to faster growth European leaders need to make a better case for reform of their pension, welfare and health-care systems and labour market regulations.

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