Western Europe: Slowing Down

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∙ITALY. Toughened by its 1964 slump, the Italian economy expanded last year (growth rate: 5.3%) with less inflation than it has had in years. The auto industry produced a record 1,366,000 cars; steel production increased by 8% while most European steelmakers were in decline. One danger is spending by local governments. Milan is the only major city with a balanced budget; in the Sicilian city of Messina (pop. 262,000), budgeted expenses exceeded revenues by a staggering 350%.

∙THE NETHERLANDS. Because of sharp inflation and a mounting balance-of-payments deficit, the central bank has introduced hardfisted monetary policies. The result: the economy is cooling off considerably. Responding to the slowdown, local governments have started putting unemployed Dutchmen to work on public projects.

∙NORWAY. Imports to satisfy Norway's craving for such consumer goods as television sets, cars and appliances led to a bigger trade deficit last year than had been expected. As a result, the populace is being urged to cut back on its spending; worried bankers are hoping that the coalition government will do the same.

∙SPAIN. Years of unprecedented prosperity, besides sending Spain's annual economic growth rate soaring to 9%, have caused inevitable growing pains. To combat an alarming lurch toward inflation, the Franco regime last year introduced new monetary restraints and tightened up on installment-buying. Spanish workers have expressed their discontent in a wave of walkouts, demonstrations and riots.

∙SWEDEN. Unemployment, largely the result of troubles in the textile industry, has doubled (to 48,000) in the past year, but the biggest problem is still inflation—brought about in large part by government spending.

∙SWITZERLAND. Price inflation remains a problem despite the country's three-year-old stabilization program. But Switzerland's economic growth rate, which slowed from 5.1% in 1964 to less than 3% last year, is expected to improve slightly in 1967, thanks in part to the elimination of restrictions on foreign investment.

For all the inflationary pressures that still exist, Western Europe's economy is more troubled by recessionary tugs. Whether the Continent's economic picture improves in 1967, says Common Market Vice President Robert Marjolin, depends almost entirely on "how business shapes up in Germany." To stimulate the economy, Bonn's Bundesbank last month lowered the country's bank rate from 5% to 4½%, last week reduced it to a flat 4%. Though he welcomes such stimulants as "the first signs of a change in the economic trend," West German Economics Minister Karl Schiller cautiously adds that "there is no reason for hasty optimism."

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