Europes social model. OUCH

[dude1394]

Ouch indeed.

http://www.brusselsjournal.com/node/933

Europe’s Ailing Social Model: Facts & Fairy-Tales
From the desk of Martin De Vlieghere on Thu, 2006-03-23 08:43

This article was written by Martin De Vlieghere and Paul Vreymans of the Flemish think tank Work for All.

On 23 and 24 March the European Council is meeting to discuss the future of Europe’s social model. The very essence of the welfare state is at stake. Europe’s present social model is unable to tackle the modern challenges of globalization, and has left Europe with gigantic problems: an unsurmountable public debt, a rapidly ageing population, 19 million unemployed, and an overall youth unemployment rate of 18%. The unemployment figures may easily be doubled to account for hidden unemployment. The untold reality is that Europe’s real unemployment stands at the level of the 1932 Depression.

A man-made Disaster

Europe’s social disaster is unfolding while the rest of the world is booming at its fastest rate in three decades. 2004 and 2005 were record years for China and India, which have double-digit growth rates, and for the USA, which fully enjoys the benefits of globalization. The world’s economy is booming at an average rate of over 4%, but Europe’s growth has stagnated at an inflated 1.5%.

Why is Europe performing so poorly? Europe’s deficient performance is incompatible with its huge potential as the world’s largest single consumer market. Its slow growth contradicts its unequalled industrial productivity and infrastructure, its outstanding education level and labour ethics, its favourable climate, “fair business” morality, and not in the least its tremendous potential provided by the opening of the iron curtain. Obviously Europe’s fairy-tale is not materializing. Nor are the inflated expectations prognosticated by Europe’s political elite at the launch of the Common Currency and the Lisbon Agenda.

Deficit Spending & Threatening Debt Crisis

The reality of Europe’s ailing economy contrasts sharply with its economic potential and with the massive resources employed to cure its ailing growth. The whole arsenal of Keynesian remedies has now been tried and has failed one by one. Massive deficit spending throughout the eighties and nineties has left Europe with a public debt unequalled in history. The size of Europe's monumental public debt is only surpassed by the hidden liabilities accumulated in Europe’s shortsighted pay-as-you-go public pension schemes.




Unfunded pension liabilities now average some 285% of GDP [pdf], more than 4 times the officially published public debt figures. Total public liabilities now exceed assets in most EU countries, and are causing runaway debt service. Richard Disney calculates [pdf] that if social policies are kept unchanged, tax hikes of as much as 5 to 15 percentage points will be necessary over the next couple of decades merely to avoid the rate of indebtedness increasing any further.

Unfortunately, this will just kill growth completely. Europe’s present social model is unsustainable because it is based on robbery of future generations. Keeping the system in place would jeopardize the next generation’s future with an unbearable and uncompressible tax burden, and would seriously add to the risk of a total collapse of Europe. Moreover these expansionary social policies have not worked so far. In spite of the largest debt buildup in history Europe’s growth has remained weak anyway. Europe’s social model is built largely on credit to be paid back by its own children.

......

Europe’s well-intentioned model is not working because it does not pay to work after the taxman has taken his share. Europe is not innovating because it does not pay to innovate after the huge costs of complying with all the prescriptions, limitations and restrictions in all Europe's overabundant licences and autorisations. Demoralization is the real cause of Europe’s stagnation. Europe’s workforce is tired of being incessantly hindered in its task of producing wealth. Demoralization is the reasen why ever more engineers, scientists and entrepreneurs flee Europe’s tax misery. Paradoxically, the Old Europe of the West must now learn from the New Europe of the East, where after years of disastrous socialism, low and simple flat taxes are being introduced, luring investors from all over the world.

Interesting pdf comparing the two cultures.
http://www.taemag.com/docLib/2005091...eredEurope.pdf