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Can The European Welfare State Survive?

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Can The European Welfare State Survive?

Can The European Welfare State Survive?

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

: its social support system. Some call it the European Welfare State. Among EU nations, there is a shared belief that the government has a responsibility to care for its citizens. The European Welfare System, largely put in place during the growth years following World War II, is now under enormous pressure as Eleanor Beardsley reports.

ELEANOR BEARDSLEY: Anders Dalsager and Margit Larsen are graduate students at the University of Copenhagen. Like all Danish students, they study for free and receive a monthly stipend equivalent to about $900 from the government.

The couple is married, and today they're picking up their two-and-a-half-year- old daughter, Astrid, from the campus kindergarten.


BEARDSLEY: Dalsager and Larsen say they were able to afford having a child, even though they don't yet have jobs, because the government also gives them a child care subsidy.

DALSAGER: As a regular student, you get five years of support, and then if you have a child, you get extra support from the government - 12 months if it's the mother and six months if it's the father.

BEARDSLEY: Six-hundred miles to the south, in Paris, Marites David is also picking up a child from preschool. David immigrated to France from the Philippines, 20 years ago. Today, she works as a nanny.

When David finally got her residency, it came with automatic coverage under France's extensive health care system. David says that has been a blessing because of her chronic asthma.

MARITES DAVID: Mostly every summer I have to go to the emergency room because I can't breathe in the summer. They look after you until you're OK. For me, everything is free - for medicine, doctors, hospital. It's nice to live here.

BEARDSLEY: Both the Danish students and this Philippine nanny are supported by the European Union's generous social welfare system. While the model and level of benefits varies from country to country, as a general rule, Europeans enjoy free health care, long-term unemployment support, liberal vacation time and solid maternity and child care benefits.

DOMINIQUE MOISI: The European Welfare system has been an important element of European identity. And I would say one of the great comparative advantages of Europe; if not in economic terms, at least in social and human terms.

BEARDSLEY: That's Dominique Moisi, a political analyst with the French Institute for International Relations.

Moisi says the welfare state has provided a buffer against the economic crisis, protecting Europeans from the kind of suffering Americans have gone through.

That may be true, says Nicolas Doze, an economic commentator with a popular French business channel. But without major reforms, Doze says the European Union will not be able to maintain its vision of a kinder, gentler way of life.

NICOLAS DOZE: (Through Translator) Our social system in France, alone, has accumulated more than 100 billion euros in debt, and it just isn't viable anymore. Today it survives thanks to one thing: France's AAA credit rating and our ability to keep borrowing to pay for the social programs.

BEARDSLEY: Doze says the Greek debt crisis has pushed European governments to do more to reduce spending in the last 10 weeks, than they have in the last 10 years. The markets have put a revolver to our head, he says.

Indeed, governments from Germany to Spain are pushing through austerity plans and spending cuts to try to reduce national debts and rein in public spending. But these reforms are being met with resistance - and not just in Greece.

Germans are angry about cuts in social spending.


BEARDSLEY: And in France, hundreds of thousands of workers have taken to the streets, in recent weeks, to protest President Nicolas Sarkozy's plans to raise the retirement age from 60 to 62.

The French government says workers must stay on the job longer to keep the state pension system afloat. But protesters here say there is plenty of money - if you tax the bankers and stockbrokers instead of bailing them out.

Francois Couder began working at the age of 17 laying underground cable in hazardous conditions for state-run France Telecom. The company has since been privatized.

Couder says the rules of the game changed midcourse, and it's the workers who are paying the price.

FRANCOIS COUDER: (Through Translator) We came into the company with a clear contract to work 40 years and retire. Now, the closer we get to retirement, they say, no, you need to go a little longer. Will they keep adding years? If it's all to retire into a hospice or a wheelchair, what's the point?

BEARDSLEY: A large percentage of social spending in the European Union goes toward supporting labor market policies, like unemployment benefits and pension systems, says economist Willem Adema, with the Organization for Economic Cooperation and Development.

WILLEM ADEMA: With the dynamics of an aging population and the increase in life expectancy, and with the financial pressures, raising retirement ages is going on across many different European countries.

BEARDSLEY: Another problem for the EU, says Adema, is the rigidity of its labor market which has inhibited the economic growth necessary to sustain the welfare state. Growth in the eurozone is only expected to reach one percent in 2010, compared to three percent in the U.S.

Denmark and its Nordic neighbors have the most extensive cradle-to-grave protection systems in the European Union. They also pay the highest taxes.

But the streets of Copenhagen bustle with well-off and happy-looking people. Denmark also has one of Europe's lowest unemployment rates - around five percent. That's largely because of a system called flexicurity that gives employers the freedom to hire and fire, while the state supports laid-off workers with generous benefits and training.

LARS BO KASPERSEN: We have a very dynamic, innovative business sector, but it's facilitated and enabled by strong public institutions.

BEARDSLEY: That's Lars Bo Kaspersen, director of the Center for Business and Politics at Copenhagen Business School.

Kaspersen says the Danish flexicurity model, which is admired by other EU nations, is being tested by the current crisis. Danes and other Europeans say they have faith in their social welfare systems. But there is a realization across the EU, that sacrifices must be made to preserve the European social model.

The one thing that no one seems to want is an American-style, mostly private, system. Europeans looked on in horror when American retirees lost their life savings in collapsed pension funds, and the unemployed lost their houses and health care.

So Europeans are doing their best to keep their system afloat.

Jacques Attali is advising the French government on ways to reign in health care spending.

JACQUES ATTALI: We may be very proud of our system, and we have not the slightest intention to change it, and we can afford it. What we have to do is just to have small adjustment of one percent of our GDP; one percent of our spending is not a lot of money. We will do it.

BEARDSLEY: But not everyone is so sure. The European Union, say Europeans, was built on three pillars: peace, growth and a shared social vision. If one of those pillars collapses, how long will the other two remain standing?

For NPR News, I'm Eleanor Beardsley in Paris.


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