Europe: Signs Of Recovery

Seven months after early signs of recovery from recession became visible in the U.S., they are appearing in Europe, too. They are confined to a few key indicators (auto sales, appliance and consumer buying) and are most evident in two key countries: West Germany and France. Nonetheless, says Italian Economist Luigi Spaventa, voicing a general European view, "I expect we've hit bottom. Now it depends on how long we keep crawling along down there."

The outlook in the four most important countries:

WEST GERMANY is regaining some of its old economic vigor. Exports have spurted to near-record levels, and domestic auto sales may equal the 2.1 million record set in 1972. But unemployment has climbed above 1 million and seems certain to get worse before improvement begins next spring.

FRANCE is getting the benefit of a $7 billion pump-priming program begun in September. Consumers are buying again, and manufacturers are stepping up production to replenish inventories. For 1976 the government predicts a 4.7% increase in G.N.P. and a lowering of the present 12% inflation rate to 7.5%.

ITALY notes improvements in several key industries, notably autos, leading Fiat Chairman Giovanni Agnelli to say: "We could perhaps conclude that we are coming out of the most acute phase of the recession." But overall industrial output is down 12% from 1974, and 1.2 million workers are jobless; another 800,000 are on short time. Industrialists fear, too, that an improving climate may encourage wage demands and strikes that could abort the recovery.

BRITAIN is experiencing a slowing of the rate of decline in gross domestic product, an indication that the economy is bottoming out. Still, the country faces huge obstacles. Prime Minister Harold Wilson's pact with the unions, which holds wage increases to $12 a week, could reduce the inflation rate from this year's staggering 25%. But unemployment, now 1,250,000, is expected to remain at that painfully high level next year, and economic growth is forecast to be a paltry 1.8%.

Among Europe's smaller countries, the pattern is decidedly mixed. Belgium and The Netherlands are still preoccupied with combatting their high rates of inflation. Switzerland has shipped home 100,000 foreign workers to stave off unemployment among citizens, but its recovery is dependent on the renewed health of its big trading partners. Sweden, which long seemed immune to recession, has started on a slide that is expected to result in zero growth this year. By contrast, Denmark achieved modest expansion during 1975, and Norway is being buoyed by prospects of soon becoming a sizable oil producer. The Norwegian economy grew a respectable 5.1% this year, and unemployment amounts to only an insignificant 1.4% of the labor force.

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