A Franco-German beauty contest Jacques Chirac and Gerhard Schrder still have lots of economic reforming to do EUROSCLEROSIS.

An ugly word, coined for an ugly phenomenon in the 1 !"#, i# $ac%. &he heady day# of 'anuary 1 , when Europe(# new #ingle currency, the euro, wa# hailed a# a certain har$inger of economic re)i)al, are a di#tant memory. In fact the performance of the1*+country euro area o)er the pa#t fi)e year# ha# $een a $itter di#appointment. And at the heart of than poor performance lie ,rance and -ermany, which account for roughly half of euro+area -./. Unle## ,rance and -ermany reco)er their 0ip, the euro area will $e condemned to remain an under+achie)er. &hat i# why the current de$ate o)er economic reform in the two countrie# matter# #o much. On Octo$er 11th, after thi# new#paper went to pre##, the -erman 2unde#tag wa# e3pected to appro)e, al$eit $y only a tiny ma4ority, a #et of la$our+ mar%et and ta3 change# that are central to Chancellor -erhard Schroeder(# 5Agenda *"1"6 economic+reform programme. In ,rance, the go)ernment of /re#ident 'ac7ue# Chirac i# pur#uing it# own reform#, which it chee%ily call# 5Agenda *""86. 2oth countrie#9 go)ernment# face oppo#ition to their propo#al# from political ri)al#, pu$lic+#ector wor%er#, trade union# and other#. ,or Europe(# #a%e, they mu#t defeat that oppo#ition and continue their reform#. :ariou# e3planation# ha)e $een put forward for the #luggi#hne## of Europe(# $igge#t economie#. Some pin the $lame on the European Central 2an%, for it# o)erly tight monetary policy. Real intere#t rate# ha)e indeed $een uncomforta$ly high in -ermany, where inflation i# dangerou#ly low; $ut other economie# in the euro area ha)e done $etter, and a)erage euro+area inflation remain# o)er *<. A #tronger ca#e can $e $uilt again#t Europe(# 5#ta$ility and growth pact6, which ha# %ept fi#cal policy in $oth -ermany and ,rance tighter than it #hould ha)e $een. 2ut in practice $oth countrie# ha)e readily $reached the #uppo#edly in)iolate ceiling for the $udget deficit i# of =< of -./. In any ca#e, e3perience #ugge#t# that fi#cal #timulu# i# not the $e#t long+term route to growth. A third culprit i# the after+effect# of -erman unification. /artly $ecau#e it happened more than a decade ago, thi# i# now ea#y to forget. >et, than%# in large mea#ure to the mi#ta%en deci#ion not only to e7uali0e the we#tern and ea#tern currencie# $ut, wor#e, to e7uali0e mo#t wage# and $enefit#, the ea#tern L?nder of -ermany ha)e continued to act a# a huge #ponge, #oa%ing up -erman pu$lic #u$#idie#, and #uc%ing down the economy(# competiti)ene## and growth. &hat in turn ha# dragged down the re#t of the euro area.

E)en unification can no longer ta%e the main $lame for -ermany(# @and hence ,rance(#A #clero#i#, howe)er. O)er the pa#t ten year#, the 2riti#h economy, once the #ic% man of Europe, ha# grown at an annual a)erage rate of *, <. In -ermany, once the continent(# Birt#chaft#wunder, the e7ui)alent figure ha# $een a meager 1,=<. Cacroeconomic, demand+led difference#, #uch a# monetary and fi#cal policy, and e)en the #train# of unification, can account for only a #mall part of thi# $ig gap. &he $ul% of it mu#t ha)e microeconomic, or #upply+#ide, cau#e#. Specifically, rigiditie# in la$our and product mar%et# in ,rance and -ermany, aggra)ated $y high ta3e# and #ocial+#ecurity contri$ution#, ha)e di#couraged in)e#tment and the hiring of la$our, %eeping growth down and unemployment high. &he reform# now propo#ed in -ermany and ,rance repre#ent the fir#t 4oint effort that the two countrie# ha)e made to $egin remedying the#e failing#. Starting with pen#ion# and la$our mar%et#, and mo)ing on to health care and #ocial #ecurity, the two go)ernment# are partly co+operating, partly competing to outdo one another. Such ri)alry i# welcome and could pro)e highly producti)e, a# in $oth countrie# there i# now a political opportunity for reform. At pre#ent, -ermany #eem# to $e in front; $ut there are rea#on# to e3pect that ,rance may in the end mo)e ahead. E)en Italy, the euro area(# other poor performer, ha# #tarted to ma%e reform#, though it ha# further to go than the $ig two. &here i# another pre##ing rea#on for pu#hing forward with reformD the #trength of the euro. In the currency(# early day#, it# relati)e wea%ne## helped to %eep the continental economie# growing $y $oo#ting e3port#. 2ut that may al#o ha)e allowed reluctant reformer# to put off hard choice#. Bith e)ery li%elihood that the dollar will continue to wea%en, #uch a let+out i# comic reform in Europe e)en more urgent. The Economist ctober !"th #$$%

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'A(G)AGE *E+E' ,-E(T&

!& T.,ES F ,E ,'E& Find /ords in the te0t that match these ty1es of 1eo1le2 Then see the Ans/er 3ey section& 1A EE.. i# a per#on or thing that announce# or #how# that #omething i# coming. *A EE.. i# a per#on who $ring# a$out or ad)ocate# change# that remo)e or put right fault# or error#. =A EE.. i# a per#on who ha# done #omething wrong, an offender. FA EE.. i# a per#on or thing competing with another. GA EE.. i# a per#on who doe# le## than he or #he i# e3pected, e#pecially in #chool wor%. 8A EE.. i# a per#on who doe# #omething @a piece of wor% he or #he i# ordered toA or #omething they ha)e agreed to do. #& S.( (.-. a4 Find /ords in the te0t that /ould fit the follo/ing lines of synonyms2 Then see the Ans/er 3ey section& 1A *A =A FA GA 8A $arren, dry, lan%, lean, #canty, thinEEE diminuti)e, dwarfi#h, in#ignificant, little, minute, micro#copicEEEE.. cure, healing, re$irth, rein#tallation, re#toration, re#u#citationEEEEE $ody, dimen#ion, entirety, integrity, ma##, )olumeEEEEEE de$t, inde$tedne##, lo##, deficiency, #hortage, #hortfallEEEEE. animation, energy, life, #pirit, )igour, )itality.

b4 Fill in /ith the synonyms you have found in a4 above2 Then see the Ans/er 3ey section& 1A She i# #omeone to admire H #he i# full of EEE.I *A &he economy wa# undergoing a period of EE. than%# to the healing #trategie# applied $y the new go)ernment. =A Our appeal for help met with a EEEE. re#pon#e. FA &a3 wa# low and the #tate #pending wa# high, re#ulting in a $udget EEE . GA &hey were feeling a EEE. $it $etter due to the new cour#e of treatment. 8A &he EEE.. of the wor% ha# already $een done.

%& Fill in the blan5s in the follo/ing te0t /ith the /ords given belo/2 Then see the Ans/er 3ey section& dependent benefits face copy put off worth choice maintain unemployment press obstacle rebels labour demonstrated neighbours

6n others7 footste1s &he dou$t on which opponent# of reform play i# #imple and #educti)e. &hey 1A EE. that countrie# #uch a# ,rance and -ermany #hould accept lower growth @and higher unemploymentA a# a price *A EE.. paying to #u#tain the percei)ed =A EE.. of the JEuropean #ocial model J. Rather pre#er)e the warm comfort of that model, they ad)i#e, than em$race the cold logic of the American way, e)en if thi# yield# fa#ter growth. >et thi# i# a fal#e FA EEE. . &o #ee why, the ,rench and -erman# need only loo% at #ome of their European GA EEEE., #uch a# the Ketherland#, ,inland, .enmar% and Sweden. &he#e countrie#+two in the euro, two out of it $ut #till 8A EEEEE on euro+area growth+ha)e reformed their 1A EEEEE. mar%et#, increa#ed their competiti)ene## and impro)ed their #ocial+welfare #y#tem#, all without #acrificing the e##ence of their protecti)e #ocial model. All $ut ,inland now ha)e lower !A EEEEE.. than America. Small countrie# may find reform# ea#ier to ma%e. 2ut gi)en enough political will, ,rance and -ermany #hould #urely $e a$le to A EEEEE their e3ample. Lac% of it i# #till the $igge#t 1"A EEEEEE to economic reform in Europe. Keither Cr. SchrLder nor Cr. Chirac ha# anything li%e the 0eal for change that Cargaret &hatcher 11A EEEEEE.. to #uch effect in 2ritain in the 1 !"#. 2oth ha)e 1*A EEEEE.. reform# for a# long a# they can. 2oth ha)e $ac%ed down in the 1=A EEEEEE of oppo#ition to change in the pa#t. Ominou#ly, Cr. SchrLder thi# wee% conceded #ome la#t+minute watering down of hi# #ocial+ #ecurity reform# to $uy off left+wing 1FA EEEEEE.. . >et the good new# i# that, in $oth countrie#, pu$lic opinion ha# #wung in fa)our of economic reform. &he two leader# #hould #ei0e the moment to 1GA EEEEEEE on while that pu$lic mood la#t#.

8& Fill in the follo/ing matri02 Then see the Ans/er 3ey section& +E9: ( )( memory performance M performer reform H remain aggra)ate ;& -atch the /ords in column A to those in column : in order to get the right collocations from the te0t& Then see the Ans/er 3ey section& A 1. #ingle *. economic =. la$our F. pu$lic+#ector G. euro 8. fi#cal 1. $udget !. pu$lic . #ocial+#ecurity 1". to $oo#t 11. fi#cal a. area $. mar%et c. deficit d. policy e. e3port# f. currency g. #u$#idy h. #timulu# i. re)i)al 4. contri$ution %. wor%er# : A*JECT6+E A*+E9: H H @unAcomforta$ly H chee%ily H dangerou#ly

<& )se the /ord family for the term competition in the sentences belo/& -a5e any necessary changes& Then see the Ans/er 3ey section& compete, competitive, competition, competitively, competitiveness, competitor 1A *A =A FA GA 8A &here i# fierce EE. $etween $an%# and it i# fiercer e)ery year. &he inten#ely E. new#paper indu#try i# gaining ground. Our e3port# remained EE priced. Our main indu#trial EE ha)e put up a new mar%eting #trategy. Ne EEE with a num$er of other candidate#. /u$lic #u$#idie# are #uc%ing down on the EE of the economy.

:& 9EA*6(G C -,9E=E(S6 (& !& 'abel the follo/ing sentences as T9)E or FA'SE& Then see the Ans/er 3ey section& 1A Euro#clero#i#, the ugly phenomenon of the 1 !"# i# $ac%. *A &he current de$ate o)er economic reform in ,rance and -ermany doe# not matter #o much. =A Real intere#t rate# ha)e $een too high and -ermany wherea# inflation i# e3tremely low. FA Unification i# the one that can ta%e the $lame for -ermany(# #clero#i#. GA &he reform# propo#ed in ,rance and -ermany are the fir#t 4oint effort that the two countrie# ha)e made to remedy their failing#. #& -atch the sentences in column A to their continuation in column :& Then see the Ans/er 3ey section& A : 1A And at the heart of than poor aA which it chee%ily call# 5Agenda performance lie ,rance and *""86. -ermany, *A In ,rance, the go)ernment of $A and e)en the #train# of /re#ident 'ac7ue# Chirac i# unification, can account for only a pur#uing it# own reform#, #mall part of thi# $ig gap. =A A #tronger ca#e can $e $uilt cA the ea#tern L?nder of -ermany again#t Europe(# 5#ta$ility and ha)e continued to act a# a huge growth pact6, #ponge, #oa%ing up -erman pu$lic #u$#idie#, and #uc%ing down the economy(# competiti)ene## and growth. FA >et, than%# in large mea#ure dA which account for roughly half to the mi#ta%en deci#ion not only of euro+area -./. to e7uali0e the we#tern and ea#tern currencie# $ut, wor#e, to e7uali0e mo#t wage# and $enefit#, GA Cacroeconomic, demand+led eA which ha# %ept fi#cal policy in difference#, #uch a# monetary $oth -ermany and ,rance tighter and fi#cal policy, than it #hould ha)e $een.

%& section&

Correct the follo/ing sentences& Then see the Ans/er 3ey 1A &he performance of the 1*+country euro area o)er the pa#t fi)e year# ha# $een a re)elation. *A Unle## ,rance and -ermany reco)er their 0ip, the euro area will remain an under+achie)er. =A ,or Europe(# #a%e, they mu#t defeat that oppo#ition and #top their reform#. FA O)er the pa#t ten year#, the 2riti#h economy, once the #ic% man of Europe, ha# grown at an annual a)erage rate of F, <. GA Starting with pen#ion# and la$our mar%et#, and mo)ing on to health care and #ocial #ecurity, the two go)ernment# are not co+operating, $ut rather competing to outdo one another.