THE ENDANGERED WELFARE STATE

Former President of the European Council Mr. Herman van Rompuy (X) and the President
of the Christian Workers Organization 'beweging.net'  Patrick Develtere (Y)
posing together with the speakers at the Conference
coming from 26 European Countries, members of the European Union.

Since the financial crisis, inmediately followed by an economic crisis, a debate is going on in Europe about how the crisis should be resolved. At stake is the preservation of the welfare state. According to many, the welfarestate threatens to collapse by the European wide austerity policies, the reforms of the pensionsystem and retrenchment of the social protection system, in particular the care for the chronically ill and the elderly.

Both left and right-wing governments join this policy, such as in the Netherlands with its coalition government of the conservative liberal VVD party and the classic social democratic party PvdA. Under strong protest of the trade unions, the coalition has raised the age for the state pension to 67 years. To reduce the costs of healthcare and social protection, the Netherlands should become a so called participatory society, where tasks are transferred to local authorities and social care again becomes a task of family, friends and neighbors. Another example is Greece, where an election victory of the far left Syriza party could not avoid a strict austerity and reform programme imposed by the EU. The German Christian Democratic Chancellor Merkel and French Socialist President Hollande demanded strong state budget cuts and radical reforms in the tax system, social protection system and others.

During the recently held Fifth European Conference on 'The State of the Welfare State in the EU in the year 1992 and 20 years later' in the city of Leuven (19-20 October 2015), Belgium, an overview was given of the state of the welfare state by as much as 26 academic speakers from as many countries. There was also a fascinating lecture by Herman van Rompuy, who told his chronicle about the five years he was the first President of the European Council (2010-2014) and Jo Vandeurzen, Flemish Minister of social policy, health and family, who explained the radical Reforms of the Flemish social protection system.

The first conference on this topic was held in 1992. The Congress document "Aim of the Conference" provides a brief review. The year 1992 was "an important moment in the European integration process as major steps had to be taken with a view to completing the internal market. Efforts to attain this goal, however, were leading to growing concern about the creation of a 'Social Europe', which in several aspects was developing at a slower pace. In this context, implementing EMU (European Monetary Union) and attaining convergence were imposing new constraints on national social protection systems. "

The second conference in 2000 was an update of the state of the welfare state in the 15 EU members. "Eleven of them already Entered the Monetary Union.The welfare states had stabilized at a relatively high level. The creation of the Eurozone did not jeopardize this. Social protection was not considered counterproductive for economic development. In the third European Conference in 2005 we observed them ( the new member states of Central and Eastern Europe) lagging behind the old Member States, while at the same time catching up at an incredibly fast speed and inventing new ways of social protection or rediscovering older ways . "

“The timing of the conference in April 2010 allowed us to compare the welfare state with the situation just before the crisis (the financial and economic crisis that struck the world economy in 2008) and made us wonder whether the crisis was already over. The question here was no longer whether and why the welfare state was in danger. Quite the contrary, in fact, as the welfare state had played an important role in absorbing the crisis. However, the question arose as to whether it also had been a source that helped solve the crisis.Since that time a new financial and broader budgetary crisis has ocurred, affecting the very core of the welfare state, and we have witnessed a deepening and espacially greater entrenchment of the economic crisis.How the Welfare States can survive this turmoil... is the question.”

Since the beginning of the crisis in 2008, the European trade union movement struggles for the preservation of the welfare state. In his opening speech entitled "Maintaining and Improving social protection in Europe: a robust system against a persisting crisis" Patrick Develtere of the Belgian Christian Social Organization gives an overview of the main views of the trade union movement in this debate.

Without social protection of the welfare state, the economy would have further collapsed and poverty have been much greater. Social protection such as unemployment benefits, sickness benefits and pensions have ensured that the purchasing power of the common people remained more or less stable. One can therefore argue that social services have been "a cushion" to absorb the shock of the economic crisis and to protect the economy from further collapse.

Thanks to these social services the government functions also as a sort of "automatic stabilizer". The system ensures that the national economy continues to operate at a reasonable level. But the government can do more. By investing for example in the modernization of education and expansion of care the government can give the economy a new boost. Like the European trade union movement Develtere advocates a classic Keynesian policy in which the government will invest anti-cyclically by spending more money in stead of cutting budgets. With such a policy the state therefore can not avoid to having to raise taxes. Especially the so-called rich should pay more through taxation of equity (capital). Such a policy would also bring about a better distribution of wealth. So far it is not yet. Meanwhile, tax evasion is tackled more vigorously.

In the chronicle of Herman van Rompuy, we read other views on the nature and solution of the crisis. Although he agrees that the ultimate goal of European policy is a social Europe, but this had to wait until the Euro crisis had been solved: "the disintegration of the euro zone would have jeopardized the survival of the EU. It would also have led to a depression in most countries and have increased inequalities between the member states. "

According to Van Rompuy the most problems already existed before the beginning of the crisis. The crisis brought the underlying problems only to the surface: lack of competitiveness, unsustainable public finances and a lack of supervision of the budgetary -, macroeconomic - and banking situation. "Divergence in economic growth and employment between members of the Eurozone after 2007 was already there but was hidden by borrowing. The growth in some countries was artificial ... So the structural unemployment rate in the eurozone at the end of 2007 was already 8.8% (10% in 2014) and the number of people at risk of poverty already 16.6% (as in 2013). "

Van Rompuy concludes that "the structural economic growth, the economic potential for many years was too low, even in the strongest economies. Sure to keep our social model financially viable and to play a role in the world. Weak demographics (the aging of the population) , lack of innovation and business investments were among others some of the causes. The 'common' market was too' fragmented 'in the sectors of energy, Information and Communication Technology (ICT) and Research & Development (R&D) "

In summary, the debts were too high (thanks to the euro which made the initial debt financing of all European countries with low interest rates possible) while the economies underperformed. There are still additional problems like the aging population, higher government costs for pensions, more care for the elderly and the globalization that requires more and better competitiveness. It is clear that only a Keynesian policiy will not be enough to strengthen the European economies so that social security and social protection can be maintained at the same level as before.

Europe therefore is looking for a fair balance between debt reduction and (public and private) investments to get economic growth, to create jobs and to make more sustainable the social welfare state for the next future.

The conference was organized by The research Institute for Work and Society (HIVA) of the Catholic University of Leuven for and in collaboration with the European Centre of Workers' Questions EZA with the financial support of the Belgian Federal Public Service Security and in association with the Athenian Policy Forum APF.