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TODAY’S FOCUS:Western Europe Closing Economic Gap with United States

April 26, 1985

BRUSSELS, Belgium (AP) _ When the talk turned to economic performance in recent years, most West European nations had little to brag about.

Britain has been burdened by record unemployment, Italy by too-high inflation and France by a creaky and costly industrial base.

Western Europe as a whole seemed asleep at the wheel while the United States and Japan roared into the fast lane of economic growth.

But when the leaders of those nations, plus Canada, sit down at the economic summit table in Bonn, West Germany, next week, the Europeans will be able to point to signs of revival blooming throughout the region.

″It’s looking much better now″ for a sustained period of moderate economic growth in much of Western Europe, said Frank Wittendal, director of European economic research at the Brussels office of the Conference Board, a business-sponsored research group.

Italy’s economy, hampered in recent years by stubbornly high inflation and large budget deficits, is likely to become one of the star performers in the second half of this decade, Wittendal said.

In Britain, where a record 13.5 percent unemployment rate is the government’s thorniest economic problem, the outlook for jobs seems brighter. Nearly 350,000 jobs were created there last year, although an expanding work force kept pushing up the jobless rate.

France managed last year to more than double its 1983 growth record.

West Germany is doing even better. Despite suffering a drop in economic output in the first three months of this year, the government says its gross national product - the value of all goods and services produced by an economy - will increase by 2.5 percent to 3 percent over the full year. That would be one of the strongest gains in Western Europe.

Economists do not expect any European country to come close to the supercharged performance that gave the United States a 6.8 percent growth record last year - its best showing in more than three decades. Europe’s average gain last year was about 2.4 percent.

But the experts say the U.S.-European growth gap will narrow, even as Japan holds to a steady, stronger pace led by a continued big trade surplus.

Adolf Ahnefeld, the chief international forecaster at West Germany’s Kiel Institute, expects U.S. economic output to rise by about 3 percent this year, compared with a 2 percent gain for Western Europe. In 1986, he predicts, both regions will grow by 3 percent.

Japanese growth will keep to a 4.5 percent pace this year and next, he says.

This converging of growth records is music to the ears of Western Europe’s leaders, who seem to have become weary of pressure from the Reagan administration to adopt its formula for economic success.

In early April, before U.S. government figures revealed a meager 1.3 percent gain in first-quarter output, administration officials launched a series of attacks on European industrial policies.

At a Venice, Italy, conference on unemployment and new technologies, Commerce Secretary Malcolm Baldrige accused the Europeans of being afraid to adapt to technological change.

A few days later, Treasury Secretary James A. Baker III extended the attack, calling on the Europeans to remove ″rigidities″ such as laws that make it difficult for companies to fire workers. Baker said Europe’s inflexibility was hurting its own economic record and posing dangers for the United States, too.

The Reagan administration also says European unemployment benefits are too generous, that union-management relations are too divisive, that too many companies are run by the governments and that governments are too quick to give subsidies to weak industries.

Ronald Reagan has an unabashed and loyal supporter of these ideas in British Prime Minister Margaret Thatcher. But many other European leaders take offense at what they see as pious preaching by a U.S. administration that itself is guilty of many economic sins.

At the Bonn economic summit May 2-4, the Europeans are expected to call on the United States to reduce its huge budget deficits, which they contend are mainly responsible for high international interest rates and erratic movements in the value of the dollar.

The Europeans, led by French President Francois Mitterrand, also are expected to defend their approach to economic management as more compassionate and based on sound principles for long-term growth.

Even if the Europeans do not prevail with their arguments in Bonn, they may be content to let their improving economic performance speak for itself.

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