SUMMARY
  • French Revolution
  • The Elusive Inflation Target
  • What’s Holding Back Japanese Wages?
Veteran business travelers have a repertoire of tricks to make trips more manageable. We know which airport security gates have the shortest lines, which seats provide the best access to bin space and how to get a nice room at a hotel. (Tell the desk attendant that you are a sleepwalker and need lots of space to wander in the middle of the night.)


My recent trip to Europe added several degrees of difficulty to the trials of travel. The voyage covered three-and-a-half weeks and six cities, so sustaining an adequate supply of clean clothes was not easy. And when my family members joined me for the final segments, their relative inexperience with the rules of the road created additional complications. (Like using limited French to negotiate separate beds for two collegiate children.

It was a very good time to be in Europe, where sentiment has been rising and markets have been outperforming. I found both developments to be well-justified.



As we discussed last month, Europe’s economic recovery and the profitability of its major companies have lagged other markets substantially during the past nine years. To an optimist, though, this leaves upside potential that may not exist in other developed markets. Unemployment has significant room to decline, consumption has significant room to increase and businesses have significant opportunity to add to capacity.

Entering 2017, the potential for anti-European Union (EU) forces to gain ground in spring elections was a distinct downside risk. But Emmanuel Macron’s victory in France seems to have changed the tone in Europe by 180 degrees. Macron’s rise has been meteoric. A relative unknown a year ago, he was elected president of France only two months ago and is now viewed as one of the most dynamic leaders in the world. He has forged an early, strong alliance with Chancellor Angela Merkel of Germany, bringing the eurozone’s two central countries into close alignment. This raises prospects of solving some of the continent’s lingering problems with continental coordination.

First, however, Macron must address issues at home. France is not the most dynamic economy in the world, given its myriad limitations on labor markets. Allowing more flexibility to hire and fire, extending the retirement age and lengthening the standard 35-hour work week are seen as essential steps to unlocking France’s economic potential. These strictures have denied many young French professionals access to full time employment and forced them to work on contracts.