May 15, 2009
AN OPPORTUNITY TO ESCAPE THE YOKE THAT GENERAL MARSHALL FASHIONED:
Europe's Social Benefits Are at Risk (MARCUS WALKER, 5/15/09, WSJ)
The European Union's top economy official, Joaquin Almunia, warned Thursday that fast-rising public debts will force governments to cut back their spending, including those on social benefits that many countries now are expanding to protect voters from the downturn. The crisis could leave Europe with a combination of "subdued growth potential, high unemployment and public finances under severe strain," forcing countries to rethink their pension systems and welfare benefits, Mr. Almunia said in a speech. [...]
High social spending has reduced the pressure on European governments to adopt bigger stimulus measures like the U.S.'s, but policy makers acknowledge it is also a long-term burden. [...]
The financial and economic crisis is leading to ballooning budget deficits across Europe. A combination of costly banking bailouts, economic-stimulus measures, and the automatic effect of rising social benefits and falling tax revenues in a recession are set to push up public debt massively in all major European countries.
Reversing the trend and complying with EU rules that limit debt and deficits will require politicians to raise taxes, angering businesses and employees who already complain of suffocatingly high tax burdens, or to cut spending, challenging powerful interest groups, including retirees and public-sector workers.
They need to not let this crisis go to waste or it's hard to see how they ever get back on track. Posted by Orrin Judd at May 15, 2009 7:40 AM