It would be incorrect to say that the UK or US economies represent some form of economic structure panacea, as low real wage growth and rising levels of inequality show, but they are growing at a faster rate and offer more opportunities. Taking some of the best aspects of their supply-side flexibilities and matching it with the German focus on high productivity and worker representatives sitting on company boards is the real opportunity for all European countries.
The legacy of national economic laws, restrictive practices and general red tape from before the launch of the euro more than a decade ago, if brushed away, should boost competitiveness, jobs and the valuation of European shares in a manner akin to the UK in the 1980s and into the 1990s.
Note the lengthy duration of these benefits. Supply-side reforms tend to start quietly and end strongly. Often the political leaders that push them through against the lobbying of incumbent interest groups are not the final beneficiaries and this inhibits their implementation.
In the midst of a lengthy period of general European economic malaise outside of Germany, the current crop of political leaders has a great opportunity to establish its legacy. There are some positive signs and useful rhetoric in Paris, Rome and Madrid among other capital cities, but now it is time for action.
Combine quantitative easing and the start of supply-side reform and European equity markets will be among the strongest performers of 2015. Baulk on the latter and they will continue to tread water.
Chris Bailey is European strategist at Raymond James Euro Equities
