PARIS: In theory, European unemployment will start falling in a meaningful, if not dramatic, manner this year as companies start to invest in manpower again after years of layoffs and hiring freezes to protect profits.

That is what politicians say, comfortable in the knowledge that economists largely share their expectation of an acceleration in economic growth, to near 2 percent, which should start at last make inroads into unemployment.

But what of the risk of a “jobless recovery”, where business picks up but jobs don’t keep pace, where companies refuse to pay bigger wage bills because they face cheap-labour competition from China, or because they prefer to reward shareholders?

And what of the outlook over the longer term when China and India, now developing at breakneck speed, account for more than one in three people on the planet? “Today we’re living a revolution,” says Alain Chaille, head of southern Europe for courier company FedEx.

He predicts global shifts in trade and production on a scale that will pitch the “comfort zone” of labour in Western Europe into direct competition with developing nations where people work for a relative pittance or unions are banned.

The optimistic view is that stronger European economic growth will bring more jobs. The European Commission says growth will rise to 1.9 percent in the euro zone and 2.1 percent in the EU as a whole this year, from 1.3 and 1.5 percent respectively in 2005.

Unemployment, the Commission predicts, will decline to 8.4 percent from 8.6 percent in the euro zone as a whole and from 8.5 percent from 8.7 in the EU.

Economists are encouraged by declines in unemployment in Germany and France, the biggest and third-biggest economies in Europe, but worry that Britain may be losing its edge as a far better performer on growth and jobs.

Politicians have to worry about the immediate future but they are also trying to get to grips with the decades ahead, so far with little agreement on what can be done.

For the past few decades, double-digit unemployment has been the scourge across most of a region which gave no thought to all-out trade competition with China when Deng Xiaoping began his reforms the late 1970s.

Andre Sapir, a Belgian economist invited to brief ministers from the world’s leading industrial powers in London last year, argued that Europe has no choice but to reform its labour markets if it wants to survive in a globalised world.

That means choosing whether to adopt a largely unregulated Anglo-American model or the high-tax Nordic model, or a hybrid of the two.

The British economy is characterised by weak trade unions, low unemployment, low job protection and a larger number of low-wage earners — what Sapir describes as a market that scores low on fairness and high on efficiency.

The Nordic model followed by Sweden, Denmark, Finland and the Netherlands is characterised by hefty state welfare provision and intervention in the labour market, strong unions, less wildly varying wage structures and low unemployment.

The continental model, which Sapir implies should be dumped, is typified by Germany, Belgium or France and involves hefty job protection, strong unions despite declining membership and a greater safety net for the needy than in Britain.

Something must be done, Sapir says, and it is largely a question of choosing either to deregulate British-style or pay high taxes for the sake of greater solidarity, as in Sweden.

It’s easy for economists to make suggestions but harder for governments to implement radical change, though they seem to agree on one thing — that something major needs to be done. Economists at HSBC bank said in a report on the three big mainland European economies (Germany, France, Italy) that it was “very easy to get very gloomy” on long-term prospects because of low productivity and an aversion to workplace change.—Reuters