Europe Struggles to Balance Economy, Social Services

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The French rejection of the EU constitution, and the state election in Germany that tossed out Gerhard Schroeder's Social Democratic Party, had overtones of a debate about the balance between a robust economy and a social safety net. For years, it seemed the French and Germans had both. But now, some think the party is over.

RENEE MONTAGNE, host:

Western Europeans appear to be having some reservations about capitalism. Those reservations were a factor in the recent rejection of the proposed European Union constitution by French and Dutch voters. They were also an issue in recent state elections in Germany. As NPR's Emily Harris reports, Germans fear that the days of a strong economy and a strong social safety net are coming to an end.

Mr. FRANZ MUNTEFERING (Social Democratic Party): (German spoken)

EMILY HARRIS reporting:

At a political rally in Germany's most populist state of North Rhine-Westphalia last month, the head of the country's Social Democratic Party, Franz Muntefering, took the stage. Part of his election message was a sharp criticism of what he calls the Anglo-Saxon model of capitalism, vaguely defined as global financial forces that seek profits over all else and leave national governments little room to maneuver. Voters in North Rhine-Westphalia tossed the Social Democrats out; nonetheless, Muntefering's comments resonate around the country.

(Soundbite of people speaking German)

HARRIS: On the other side of Germany, in a suburb of Berlin, Antia Zampich(ph) keeps one ear tuned to the antics of her four-year-old daughter, while getting her nine-year-old son ready for soccer practice. She feels that life in Germany is becoming increasingly inequitable.

Ms. ANTIA ZAMPICH: (Through Translator) The gap between the poor and rich is getting bigger and bigger. The little people constantly have to pay more, and the big guys, first of all, have so much money anyway, they don't care, and second, they can afford more expenses, so people become more and more angry. One day, Germany will not be such a pleasant place to live in anymore, I guess.

HARRIS: Recent polls have shown that three-quarters of Germans think companies fire workers just to make higher profits, just as many people feel that corporations have more power in Germany than politicians do. Government cuts have reduced long-term unemployment benefits and shifted more health-care costs to consumers. This makes Zampich laugh at suggestions that people should spend more to help spur the economy.

Ms. ZAMPICH: (Through Translator) People who have enough money probably spend it. The others have less and have to wait and see. We are affected by this problem in our own life right now. My husband runs a fitness gym, and that's now a luxury for many people.

HARRIS: Earlier this year, Chancellor Gerhard Schroeder's Social Democratic Party drew up a list of so-called locust companies, accusing them of buying businesses and gutting them for profits. Rolland Flok(ph) heads one of them. He says that such finger-pointing is just an effort to distract voters concerned about losing social benefits from Schroeder's actual efforts to improve Germany's business climate.

Mr. ROLLAND FLOCK (Business Owner): (Through Translator) The government is actually doing a lot to provide capitalists and capitalism better opportunities in Germany and is trying to create better possibilities for everyone. The rhetoric is the opposite of the government's own policy.

HARRIS: But some say the government just doesn't have the guts to pass significant economic reforms that businesses say they need.

Mr. THOMAS DROIZICA(ph) (India Droizica Berlin(ph)): My name is Thomas Droizica. I'm the owner of India Droizica Berlin, which is a middle-sized company making plastic housing.

HARRIS: He took the company over from his father 20 years ago. As global competition increased, so did the impact of German law on his business.

(Soundbite of machinery)

HARRIS: Some 50 full-time employees work here, mostly in a small factory making cases for computer modems. The biggest problem Droizica faces is that if orders slow down, he must prove to the government he has a good reason to lay people off. Severance is also set by law. This, he says, makes it impossible to risk hiring people and drags the whole economy down.

Mr. DROIZICA: If it's a little up in April, you wait until July to hire one or two people, but you wouldn't have this risk of laying off people again. You would have done it already in May.

HARRIS: Droizica responds to the debate over capitalism by saying the best social benefit people can get is a job, but more than 90 percent of Germans told one polling firm this spring that the most important role of companies is to provide secure employment. Emily Harris, NPR News, Berlin.

MONTAGNE: You're listening to MORNING EDITION from NPR News.

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