THE FRENCH HAVE said non, the Dutch have chosen nee, the Danes are likely to follow with a nej in September - and now an Italian senior minister wants to say ciao to the euro. With each day's depressing news about disunion and dissension, the European Union seems to be falling deeper into some political and economic morass - possibly a new strain of 'euro-sclerosis' that can jeopardise decades of economic liberalisation and integration, and usher in a new self-destructive wave of protectionism and even xenophobia. Hence, one cannot help but notice a certain schadenfreude in Asia, Europe's newest bete noire over the issues of textile exports and outsourcing, or delocalisation, as the French have demonised it. After all, with the euro at an eight-month low after being pulled down by the EU disarray, Asian firms can shop for cheap European assets, such as inefficient but technology-rich industrial giants and resources firms. Chinese, Indian and Japanese giants have been busy snapping up - or are in the process of cherry-picking - tarnished European jewels such as Rover, and strategic but cheap production and distribution bases in eastern Europe, in the case of Toyota and Hyundai. Que pasa? In a way, it is a contrasting tale of two trading blocs: while fortress Europe seems to be returning to its bad old habit of raising protectionist walls and throwing money into the maws of its insatiable pension and unemployment benefits systems, Asian economies are intent on breaking down trade barriers and liberalisation. Bilateral free-trade agreements have been signed or are in the process of being discussed among Japan, Australia, Malaysia, the Philippines, Singapore, Thailand and Indonesia. Australia has signalled its intent to join Asean + 3 - the political-economic agglomeration of the 10 Asean members and their northern neighbours, Japan, China and South Korea. Even South Asia is stirring, with Bangladesh, India, Sri Lanka, Thailand, Bhutan and Nepal scheduled to form a free-trade zone by July next year. And in what is billed as the first transpacific free-trade agreement, Brunei, Chile, New Zealand and Singapore have agreed to make 90 per cent of their trade duty-free by next year. This is not to say that the EU has reached an economic dead end. The 12-nation eurozone is a formidable US$10 trillion economy, with some of the world's bluest of blue-chip companies. And the entry of 10 new members in May last year has made the EU the world's largest trading bloc, with a population of 455 million. Still, it was largely for economic reasons - specifically fears over the loss of jobs and Old Europe's much-vaunted 'way of life' founded on generous social-welfare systems - that 55 per cent of French voters and 62 per cent of the Dutch rejected the new EU constitution. The litany of Europe's economic woes puts South America to shame. About 25 per cent of French below 25 years of age are unemployed and the jobless rate in Germany is at its worst since the Depression. Switzerland is on the brink of a recession, where Italy is already deeply ensconced. According to Eurostat, the eurozone economy grew 0.5 per cent in the first quarter from the previous three months, the same rate for the 25-nation EU. The European Commission, the EU economic watchdog, has again cut its second-quarter growth forecast for the euro region to 0.3 per cent from 0.4 per cent as unemployment surged to a five-year high of almost 9 per cent. For the full year, the EC expects the region to grow 1.4 per cent, below its previous forecast of 1.6 per cent. Most EU member countries want to kickstart their economies through big spending, but that can only mean more headaches for the EC as most eurozone members are already violating the stability and growth pact, which limits national budget deficits to 3 per cent of gross domestic product. France's budget deficit hit 3.6 per cent of GDP last year while Greece's was almost double that. But there are pockets of economic outperformance. In Norway, the jobless rate last month fell for a fourth straight month to 3.3 per cent. In Ireland, the jobless rate remained at 4.2 per cent last month for the second month in a row. While the Organisation for Economic Co-operation and Development expects Italy's economy to shrink 0.6 per cent this year, the EC forecasts a 4.9 per cent growth rate for Ireland this year and 5.1 per cent next. The key to this uneven development lies in the uneven pace of economic liberalisation embraced by EU members. While Ireland and Spain have opened up their gates to migrant labour and privatised state firms, France and Germany have been slow at reforming their restrictive labour markets and money-guzzling state sectors. Then there is the issue of 'legacy costs'. Somewhat mirroring the airline and vehicles industries of the US and Asia, Europe has its own budgetary burdens of pension payments and generous unemployment benefits. Until and unless Old Europe cuts itself lose from its big-government, socialist past, it will continue to be afflicted by euro-sclerosis. While Asia may feel immune from Europe's malaise, in the long term, as Asian firms expand in Europe, they too run the risk of being infected.