The main question occupying financial markets and financial journalists at the moment is whether or not the next European bailout will work. Forget it. The bailouts will never work. The reason is that Europe does not work. Literally. In Europe the fundamental problem is that in most countries not enough people work, and workers do not work productively. The Europeans themselves recognised this when in 2000 they wrote the “Lisbon Agenda,” an ambitious program aiming to make Europe the most productive and prosperous region in the world. The Agenda included a lot of good ideas to kick start economies, including labour market reforms, R&D and innovation policies, and educational reform. Few countries implemented any reforms, and European economies continued to perform poorly even before the GFC. Some countries did introduce a number of reforms. In Germany the Hartz reforms have been controversial, but seem to have helped reduce long term unemployment, and kept unemployment low during and since the GFC. To give a better idea of the lack of work consider the following numbers – of course I could carve this up by hours, or by age etc, but you get the same picture. The fraction of working age who are working in Australia was 72.6% during 2000-2009, similar to the UK or US (71.9% and 71.5% – numbers from the OECD). In Germany this number is 71.7%, while in France it is 63.0%,- in Greece 60.6%. Spain is 62.7% and Italy is 57.8%. Of course some of this reflects female participation, but that is the point. Without females, or young people (in Spain especially) or older workers actually working it is not possible to generate the GDP, living standards and tax revenue to support a modern economy. Can Europe find a way to get people to work? This should be the real issue on the table, not the issue of whether sovereigns can find funding for the next day/week/month.