Fiscal crises threaten Europe's generous benefits

[Synicus Maximus]

Source: AP

LONDON (AP) - Six weeks of vacation a year. Retirement at 60. Thousands of euros for having a baby. A good university education for less than the cost of a laptop.

The system known as the European welfare state was built after World War II as the keystone of a shared prosperity meant to prevent future conflict. Generous lifelong benefits have since become a defining feature of modern Europe.

Now the welfare state - cherished by many Europeans as an alternative to what they see as dog-eat-dog American capitalism - is coming under its most serious threat in decades: Europe's sovereign debt crisis.

Deep budget cuts are under way across Europe. Although the first round is focused mostly on government payrolls - the least politically explosive target - welfare benefits are looking increasingly vulnerable.

"The current welfare state is unaffordable," said Uri Dadush, director of the Carnegie Endowment's International Economics Program. "The crisis has made the day of reckoning closer by several years in virtually all the industrial countries."

Read more: http://apnews.myway.com/article/20100523/D9FSPCAO1.html

[DJ13]

1. Funny

Europe could afford those benefits before they gave away all their money to the banksters.

Do the politicians in Europe seriously think their people wont see that?

[dkf]

3. Actually the banksters helped Greece hide their debt

That enabled them to keep paying these benefits longer than they would have otherwise.

[liberation]

4. That is not entirely correct...

Wallstreet helped Greece to some creative accounting, so that they could pass lower tax rates for the wealthy (and corporations) in order to attract more business (the original excuses). While passing the required load from the reduced revenue onto the EU, which show the whole shady deal and decided to put its foot down. Wallstreet bailed on Greece and pretended they had nothing to do with it.


Things will get interesting the minute banksters force the EU to reduce social spending. The Left over there is not toothless nor shy, unlike whatever ineffective useless excuse for left we have remaining in this country.

[David__77]

2. Generous? The workers produce everything, they need no "generosity."

The speculators and other parasites are vampires - they are not "generous."

[liberation]

5. Bingo!

All those benefits are not "entitlements" that is money paid by citizens for citizens.

It is rather obvious that the people at the top in the US have framed "benefits" as a divide-and-conquer game. And that narrative comes shining through in this article. Europeans, at least the middle and lower classes, do not share that view. Which is always rather telling when you read an article on the matter written by an American or European source/author.

[Doremus]

13. Thank you. nt

[MellowDem]

6. Welfare programs are heavily dependant on economies...

when the economy suffers, the welfare programs suffer. If you have incredibly good welfare programs set up during times of prosperity, or if you have been overspending for many years to keep the welfare programs, the chicken will come home to roost sooner or later during bad economic times.

[David__77]

7. That's exactly incorrect.

Insofar as it does not acknowledge that it was the adoption of US-style neoliberalism that caused the crisis, not the social security framework in Europe. Europe must reject US-style neoliberalism and return to real economic development.

[Go2Peace]

8. Ding! Unemployment brought on by Globalism and the NWO is what is pressuring this

The world is far more prosperous than it was 30 years ago. We should be seeing many more sustainable decent economies with lower work hours and more security. But we are instead seeing the opposite. What exactly happened to all those productivity gains?

[MellowDem]

24. America and Europe aren't that much more prosperous though....

and in some cases even less. The gains have pretty much mostly been made in underdeveloped nations that are developing. And gains in productivity can lead to higher unemployment. Europe's economy has been pretty stagnant, meaning their not producing more, but more and more people are reaching an age that they recieve benefits and aren't working anymore with fewer young people, due to low birth rates.

[Go2Peace]

29. That's the "meme" that the Republicans and corporatists have been playing. But it is not the truth

Incredible prosperity has been mismanaged for close to 50 years now. There is absolutely no logic to the idea that productivity has increased as dramatically as it has and yet we have to accept less and less stable lives. We went from one worker per household to two during that period as well.

Republicans want us to give up on progressing as societies and buy their bullshit that we have to become slaves to survive, and sorry, but you don't help by parroting it.

I could potentially buy the bullshit if world progress had stalled during the last 50 years. But it hasn't, and there is more prosperity than ever, it has just been concentrated in a few hands and at times wasted with innefficiencies.

The NWO wants us to believe that the life that our parents and gransparents had is no longer possible. Bullshit, and anyone that tries to push that nonsense should be ashamed as well.

[MellowDem]

32. It's no meme...

it's a real problem in Europe, a place that leans more towards regulated markets than here. You can pretend it's not the truth, but it is. Saying so doesn't back up corporatists. The problem isn't even really about regulation, as much as demographic change and population. The world hasn't stalled, but many economies have stagnated, including much of Europe's.

The fact is that part of the reason we don't think we will be able to have the lives our parents and grandparents did (in terms of real income and resources, not necessarily quality of life), is because the world's resources are already being strained, and there is more competition for them all the time as other countries develop with populations that are expecting to have continuously more than their parents did as well. This wasn't as big of a problem during our grandparent's or even our parent's time.

I would say that corporatists would be saying what you are. Namely, that we have the resources to keep expanding forever and that we should always expect more. But really it is all about sustainability. Smaller populations cannot sustain the same level of funding for much larger populations of the elderly. It's simple math.

[bossy22]

18. You are not entirely correct either sir

Yes, U.S. economic style aided the crisis and was a large part but it wasnt the main issue that brought the question of the european welfare state to the forefront. The truth is this crisis just accelerated what was going to happen in europe anyway (this was the straw that broke the camels back per se). A stable welfare state requires foremost- beyond economics- a stable population demographic. That, europe does not have. For the last few decades they have had declining birth rates (that are now well below replacement rates) and a rapidly aging population (along with stagnant population growth). There are forecasts that show that while the U.S. in the next 30 years will grow by 100 million, europe will decrease by 10 million. Declining and aging populations don't bode well for social services. There will be less and less young working people to support the elders and the system will run out of money.

Europe has a serious problem- one that makes our social security crisis look like mouse. The truth is their is very few options for europe to get out of this mess. Either have more babies or start cutting benefits

[David__77]

27. That's what efficiency gains and immigration address.

European labor is more productive than in years past, and immigration has helped to mitigate the decrease in birth rates. A closer look at the demographics is called for.

[Go2Peace]

30. It's almost laughable what the NWO wants us to believe. That despite 50 years of progressive increas

that we can't even expect to have as stable a life as our grandparents did? That we should expect half of the world to be slaves? Shame on people to even believe it.

[MellowDem]

36. When our grandparents were alive...

MOST of the world were "slaves". The world has become much more prosperous since then, but also a lot more crowded, and environmentally, humankind is hitting the wall of what finite resources can provide.

[MellowDem]

35. Efficiency gains do help...

but even including efficiency gains and immigration (which isn't all that much in Europe), it's not enough to solve the problem of decreasing birth rates or the aging population.

[MellowDem]

22. Not at alll...

Europe hasn't adopted US-style neoliberalism. Their economies are more heavily regulated. The problem is that we now live in a globalized world, where if one large economy implodes, for whatever reason, all the economies suffer.

Also, one thing Europe does do is deficit spending. They were spending in deficit during the good years as well, which is a recipe for disaster no matter how regulated your economy is. It's not as simple as one answer being the blame for everything. And I don't know how you can argue that Europe's economy is now like ours, when it's not.

[David__77]

28. What's wrong with deficit spending?

It's debt as a percentage of GDP that is far more important. Deficit spending is just fine in certain scenarios.

[MellowDem]

33. Continuous deficit spending...

especially during good economic times. It's a problem because it leads over time to huge debts as a percentage of GDP. And it can be hard or impossible to stop deficit spending once it starts politically.

For example, let's say times are really good in Country A. So good that the governments coffers are flowing, and they feel like they can expand social programs that will be popular with the population and also help keep them getting elected. So they do this, and a decade goes by, and the economy is hurting. They have been deficit spending all these years to keep those same social programs because it would be political suicide to cut them back. So they just keep on going deeper and deeper into debt because no one wants to cut anything. That can lead to a real crises.

I do agree that deficit spending can be fine in certain scenarios, but in the last couple decades it has not been used like it should be. The best thing to do is not overspend, but even save during the good times, and spend a lot during the bad times, even deficit spending, to get the economy back on track faster. As it is now, it's deficit spending during the good times and even more deficit spending during the bad.

[Go2Peace]

31. Exactly, They had been trying to create a humane system and were successful

and would still be successful, but neoliberalism is washing over the world and taking out any economy that does not play by it's rules. They made mistakes that allowed them to get caught in it. Unfortunately they did it at a time when there is not a lot of room to fix it on their own, and when the world is being swampted with the propaganda of slavery.

They even have a name for the bankers that went for the jugular and artificially accelerated the current crisis. If you read up on it they made the mistake of allowing their banks to participate in the derivitives that almost took us down. But unlike the US, where we got spared (at least for the moment), a "pack" went after them and tried to bancrupt their economies. They are reeling at the moment. But if they have the chance and a little time and their population does not loose faith they could come out even stronger.

[MellowDem]

34. Regardless of the current economic recession...

Europe has been having issues for a while now. The recession just made those problems worse. It's not neo-liberalism that is to blame for the big problems, but rather mismanaging their socialist economies and welfare programs. Not to mention unsustainable demographic changes. Even before the recession, much of Europe couldn't afford their social programs and have been having to cut back somewhat.

Lack of regulation in the financial market definitely played a role in this scenario, but it's not the only problem. We can regulate the financial market so this never happens again, and the main problems for Europe will still be there.

[zenprole]

9. Pure Propaganda

Is it surprising to see the Carnegie Endowment fronting for failed global capitalism? If they said "At our casino we're going to feed poker chips to our guests," it would make more sense.

The good news is that Europeans will respond very differently to these grabs at their standard of living. Their histories have far more revolt than ours ever did.

[melm00se]

10. this is driven by a combination of events

1) the drop off in birth rates in European industrial economies (not enough younger workers to pay into the system)
2) the increase in life expectancy (people drawing from the system for longer periods of time coupled with the increased societal costs, mainly medical, of an aging population)
3) the drop off in economic output (thus lowering tax revenues)
4) finite available resources

post WWI and WWII the reverse was true: birth rates were higher and there were fewer "old" people so the number of workers and the tax revenue they generated more than offset the increasing costs of an aging population. A tipping point has been reached where the ratio of "young" vs. "old" is skewed the other way and there has been a decline government revenue.

Raising taxes will, temporarily, slow this process but as the scales continue to tip towards the "old" side, the issue will become more and more acute until the system(s) implode.

there are some, also, more temporary fixes: adjusting benefit payouts, adjusting the benefit qualification and, as above, increase in tax rates but the underlying issues (again, irrespective of economic paradigm), namely population balance, must be addressed to bring the system back to, at the very least, a level of equilibrium.

[muriel_volestrangler]

14. This has nothing to do with birth rates, so far

Europe does not have a shortage of young workers. Youth unemployment is high in many European countries. And immigration from outside Europe could be increased any time they wanted, if there were to be a shortage of workers.

Yes, life expectancy, and increased medical costs, plays a part. With people living longer and, at the start of their retirement, being healthier, I think this justifies increasing the ages at which people are entitled to retirement benefits. But a gradual increase is all that's needed (again, with youth unemployment, there's no point in forcing older people to stay in work longer).

As you say, resources are finite; and that's an important reason why an increased birth rate would be a terrible solution to 'population balance' - it causes more of a problem later.

[slackmaster]

15. Actually, it has a lot to do with birth rates. The arithmetic is relentless.

......According to the European Commission, by 2050 the percentage of Europeans older than 65 will nearly double. In the 1950s there were seven workers for every retiree in advanced economies. By 2050, the ratio in the European Union will drop to 1.3 to 1....

That is a serious problem, and ignoring it won't make it go away. There are plenty of young workers to get the work done, but not enough to support the growing population of retirees at the present level of benefits and rates of taxation.

http://www.nytimes.com/2010/05/23/world/europe/23europe.html?ref=world

[muriel_volestrangler]

16. Again: a rising birth rate would be a fucking disaster for all concerned

And the arithmetic is obvious for that. It means a bigger population, using more resources, producing more waste and more greenhouse gases.

There is no shortage of young people in Europe. There will be no shortage of young people in the world in the foreseeable future; and if future birth rates in Europe will ever mean a shortage of workers, then the liberal benefits described here will be attractive to immigrants from many countries that will have very large populations keen to flee from resource wars, rising sea levels etc.

Europe's "fiscal crises" (OP article) or "deficit crisis" (your NYT article) are not about 2050 population figures. They're about the present economies. Yes, the larger numbers of retirees and the cost of medical care means more expenditure per worker than there used to be; but to say a solution would be "get more people born" would be as dumb as the bankers who thought that you could rely on house prices going up forever, and that was how the economy would get rich. And if the European birth rate had been higher up until now, then we'd have disasterous unemployment levels.

[bossy22]

19. its a damned if you do damned if you are don't scenario

no, there arent going to be enough young people to support the elders; thats a fact. Social benefit revenue is just a government run ponzi scheme; except with a good intention and output. But what happens when less and less people pay into a ponzi scheme; it goes belly up.

Both the above posters are right, you can't ignore population issues. There isnt going to be enough young people working to offset the larger amount of older people living longer.

How can a system that is struggling to pay for services when the ratio is 8 to 1 (payers to users) when the ratio is going to be 1.3 to 1?

so how do you propose to fix this problem?

on edit: the birth rate increases we talk about arent to actually grow the population, but to keep it stable...right now the birth rate in europe is WELL BELOW the replacement rate- which means that in the future europe is probably going to see a population decrease

[muriel_volestrangler]

20. For the third time: if there ever is a shortage of workers, immigration

There are tens of millions of young people who would be happy to migrate to Europe.

"How can a system that is struggling to pay for services when the ratio is 8 to 1 (payers to users) when the ratio is going to be 1.3 to 1?"

It's not 8 to 1. It was 7 to 1 in the 1950s, according to the NYT article.

Here are the current and estimated figures for 2050, for Western Europe population (again, from teh Census site linked to above):

2010 15-19: 22,647,308
2010 15-64: 266,574,317
2010 65+: 72,934,750

2050 15-19: 18,986,314
2050 15-64: 221,535,687
2050 65-69: 23,267,350
2050 65+: 111,409,303

So, taking the working age as 20-64 now, and retired as 65+; and increasing the retirement age 5 years over the next 40, we get:

2010: 20-64:65+ = 243,927,009:72,934,750 = 3.34:1
2050: 20-69:70+ = 225,816,723:88,141,953 = 2.56:1

It's not a huge difference. And note that the under 20 population (who basically don't work either - those under 20 that do work are pretty balanced by those over 20 still in full time education) falls in that time from 85,122,015 to 73,146,746. So while the 'retired' sector may go up 15 million, the 'pre-work' sector goes down 12 million. So there are some savings in education spending. To be perfectly mercenary, if you supplement your young adult population with immigrants, you don't have to pay to educate them.

But, looking at it from the point of view of the whole world, a low European birth rate is good. It decreases the population in a crowded, high-consuming-and-polluting part of the world. There is even a theory that an excess of young men (compared to older men) in a region is one of the best predictors of war. Having a region of the world that can absorb the excess elsewhere will be good for peace too.

[melm00se]

21. I see I need to clarify something

I am not advocating increasing the total population of Europe but rather somehow re-balance it so that the population isn't skewed in favor of one population group (in this case: age).

Allowing it to get too much out of balance, in the long run, can cause some significant oscillations where the population swings almost too wildly around the balance point in an effort to correct itself and that can really cause some societal upheaval.

[muriel_volestrangler]

23. I don't think there will be a large imbalance, though

From 2010 to 2050, the percentage of the population that is between 15 and 64 will drop from 66.3% to 57.2%. And by 2050, the 65-69 age range will be 6.0% of the population. Increase the retirement age by 5 years, and the 'problem' almost goes away.

[Odin2005]

11. BANKSTERS threaten Europe's generous benefits!

[SocialistLez]

12. The people will be out in the street vs. here in America.

We will just take it.

We'll bitch about it at home but....we won't protest.

[lovuian]

17. this is really why they destroyed Europe and why

the Europe Union was created

to destroy Socialism

but alas I think the Europeans have a few surprises up their sleeves

[defendandprotect]

25. You mean capitalism threatens socialism . . .more likely . . .

[yurbud]

26. that was probably the point. After collapse of communism, wealthy see no need to placate masses

Eurosocialism is the equivalent of our support of revolutionaries in Cuba and the Philippines during the Spanish American War or Lawrence of Arabia's help to Arab nationalists.

As soon as the common enemy was vanquished, the rich drew the long knives on their native allies and there was no more talk of independence--just subservience to a new imperial master.

Eurosocialism was a way of keeping Europeans from finding the Soviet variation too attractive. Now that the boogey man is gone, the rich don't feel a need to ''bribe'' the poor and middle class. It's the wealthy's world and we just live in at their discretion.