Weak economic growth in the eurozone compared with the United States and Asia is resulting in job losses and corporate relocations, such as those announced by the US computer giant IBM.
The group said last week it would eliminate 10,000-13,000 jobs worldwide, with most of the cuts to come in Britain, France, Germany and Italy.
IBM chief financial officer Mark Loughridge said the group would create smaller, more flexible local units to improve contacts with clients while eliminating corporate bureaucracy in lower-growth countries and shifting resources to higher-growth markets.
It was the latest in a series of examples that showed Europe was finding it harder to attract investment by major companies.
Last year, such investment grew by only 1.7 percent, following a slight decrease in 2003.
In Germany, which has the eurozone's biggest economy, business investment growth was even weaker, posting an increase of 1.0 percent in 2004, following a a 3.0-percent drop the previous year, according to data compiled by the Ifo economic institute.
Meanwhile, investment in the United States climbed 3.3 percent in 2003 and then soared 10.6 percent in 2004, boosting the economy as a whole.
Economists forecast investment growth will exceed 11 percent in the United States this year.
Economies are growing elsewhere too, while layoff plans and relocations have multiplied across Europe, particularly in labor-based industries.
On April 22, the German group Siemens announced it would move part of an electronic auto parts plant from the southwestern city of Wuerzburg to the Czech Republic.
"High technology that employs skilled labor is being hit in turn," noted John Segrich, an analyst with JP Morgan.
The US personal computer giant Dell said late last month that its Indian subsidiary would employ 10,000 people by the end of this year and continue to expand thanks to a cheap and skilled pool of local talent.
That compared with the opening of a small Dell plant in the eastern German city of Halle that was expected to initially employ around 300 workers.
Meanwhile, the German professional software group SAP plans to open a major programming center in the high-tech southern Indian city of Bangalore.
Christoph Weil, an economist at Deutsche Bank, said that "businesses feel they are operating in a persistantly uncertain climate in the eurozone, mainly because it suffers from very weak consumption."
Household spending remained subdued there last year, growing by 0.6 percent in the fourth quarter after three quarters of quasi stagnation according to the European Union's statistics service Eurostat.
Gross domestic product across the 12-nation zone expanded by only 2.1 percent in 2004.
"The second big handicap in terms of investment is the strong euro, which penalises investment compared with the dollar zone," Weil said.
The single European currency increased in value by eight percent against the dollar last year, cutting into sales and repatriated profits.
"In the end, dynamic exports are not enough to compensate for the negative factors," explained Annette Welchselberger, an analyst at the Ifo institute.
"As a result, hiring and investments will undoubtedly grow at a very moderate pace this year in Germany, as well as in the entire eurozone."
By: N. Peter Kramer
