Financial Crisis Mars European Welfare

¡¯From the Cradle to the Grave.¡¯ This refers to the lifelong welfare system, largely applicable to Europe that rose out of the ashes of World War II. It has allowed Europeans to enjoy generous lifelong benefits such as six months of vacation a year, retirement at 60, and good university education that only costs a little sum of money.

The welfare statism of Europe, which used to be cherished by its citizens, is no longer affordable with the sovereign debt crisis that has spread from southern Europe to other European nations.

The main cause behind the collapse of the welfare programs of Europe was its reckless pursuit of the idea of building a ¡®welfare paradise,¡¯ without supporting it with economic growth, economists say. Robert Zoellick, the President of World Bank, says growth momentum is necessary to solve this European crisis.

After World War II, European nations were able to inject lots of money into social welfare programs, thanks to the North Atlantic Treaty Organization (NATO) that allowed European countries to share the burden of expenditures for national defense and security with its member countries and the U.S.

Also, European nations were able to use a large part of their budgets from high taxes for their welfare system. As a result, the European Union¡¯s public welfare spending in 2005, for instance, marked 21 percent of GDP, which was far higher than 15.9 percent of the U.S. Many Europeans knew how to take advantage of their welfare system, even when expenditures exceeded revenues. However, they failed to ask themselves one thing: Where does the money come from to support the generous welfare system?

European nations including France, Germany, and the U.K. are now rushing to cut salaries, raise the retirement age, increase working hours, and reduce health insurance and pension benefits. Greece, Portugal, and Spain are asked to reform their labor sector and strengthen their competitiveness and potential for economic growth.

Once considered ideal, the continent¡¯s welfare model now confronts its greatest challenge in decades, going through harsh reform on demand. Good old days are gone now.