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.

EUROPE IN DISTRESS?

Ukrainian VOST leaders, President Oleksander Dzhulyk (on the right) and Vice-President Yuri Kyrilo, asking for European help and sanctions at the start of the seminar because of the 5th social week in Oostende, Belgium.

The seminar started with a modest protest of 2 trade union leaders of VOST Ukraine. They held up the flag of Ukraine between them together with protest signs asking for European help and sanctions. After Herman van Rompuy, President of the European Council, had held his opening speech, they asked him what Europe is planning to do with Ukraine?

Van Rompuy expressed his disappointment that the president of Ukrainian Janoekovitsj did not sign the historical document on cooperation with the EU during the 2 days meeting in Vilnius, Lithuania in December last month. During that meeting it was the President himself who declared that he could not sign because of pressures from Moscow. The president did not have the clear political will to come to an agreement with the EU. However, Van Rompuy confirmed that the door is still open for cooperation between the EU and Ukraine. In the mean time the EU will put maximum pressures to the Government of Ukraine not to use violence. Violence is not the answer to the prostests but political reforms. He doubts the effectiveness of EU sanctions on the Ukraine, it did not work in the case of Belorus. The EU will look for the best way to help Ukraine. During the visit of President Putin to Brussels, the EU will also speak to him about Ukraine.

From right to left. Herman van Rompuy, President of the European Council (Mr. Europe) speaking. Jaap Smit, President of the 5th Social Week and Cardinal Peter Turkson.

The seminar was organized by ACW, the Umbrella of Christian Workers Organizations in Belgium, together with the European Centre for Workers Questions (EZA) and others, financially supported by the European Commission. The guiding slogan of the seminar was “Europe the age of responsibility”.

The participants, coming from all corners of Europe, were welcomed by Jaap Smit, Chairman of the initiative Committee of the 5th European Social week and until the 1st of January President of the Dutch trade union confederation CNV. His message was critical on Europe. Europeans are living in difficult times. “Nowadays 25% of young people in the EU are unemployed...The number of men and women living below the poverty line, is growing (from 20 to 24 million). European responses have thus far proved to be insufficient.”

Cardinal Peter Turkson stressed during his opening speech the importance of the Christian social ethics as guidelines for the current European and global challenges. According to the Cardinal the Compendium of Social Teachings of the Catholic Church is a source of wisdom, inspiration and guidance. The starting point is the goodness of God's creation which leads to 4 pillars: human dignity, common good, solidarity and subsidiarity (participation) complemented by reconciliation. We are all equal in dignity but we are not all the same. Solidarity means making history with others based on participation (no exclusion). The biblical question “where is your brother” is a radical challenge, an option for the poor. Fraternity is a global challenge. We share the same house (earth). Charity makes it possible to create a part of heaven on earth.

Fritz Neugebauer, President of the Austrian trade union of Public Servants (GÖD) and second President of the Autrian Parliament, went back to the ancient commandments that everybody knows, as the basis for business ethics, entrepreneurship and social dialogue: you shall not kill, you shall not steal (do not be corrupt, do not bribe people), you shall not lie (do not falsify money, no money laundering, do not authorize false audits etc.) and you shall not sexually abuse anybody. The principle of reciprocity must lead us: do not do to another what you do not want to be done to you.

Herman van Rompuy, also called Mr. Europe, is Europe's little Obama. Van Rompuy is not elected by European voters like Obama is elected by American voters. He is chosen by European leaders who indeed have been elected by their national voters. Van Rompuy is also not chief of the army like Obama but the European leaders who choose him, have armies like for example France and Great Britain but also smaller nations as Belgium and the Netherlands. The US and the European armies are cooperating in the NATO, a kind of Euro-American army that is operating world wide like for example these days in some African countries. So his words may not have the political weight like those of Obama but they are also important. Compared to the US, Europa is a soft world power, but still a power.

By his visit to the seminar, Van Rompuy showed his democratic attitude. He stressed that measures taken by the EU to restore financial stability, were aimed to create employment. The downfall of the EURO, which was at a certain moment not far away, would have destroyed the greatest political project of the 19th century, the creation of the EU. According to him there is no alternative for this European project of peace, progress and democracy.

From right to left. Bartho Pronk, President of EZA, speaking. Jerôme Vignon, Chairman of the French Social Week and Pierre Defriagne, Professor in Economy and Director of Maradiaga Foundation at the College of Europe in Brugge, Belgium.

Indeed big mistakes have been made: bad financial risk management by banks and other institutions, not enough supervision by the national banks and excessive indebtedness stimulated by low interests. The economic recession was the consequence of artificially economic growth based on easy credits and loans, for governments and private enterprise. But already before the economic crisis, Europe had serious problems with finding answers on the global challenge of China and other fast growing economies like Brazil and India. Economic growth was already low, unemployment already high. That is why Europe was already looking for new strategies like the Lissabon strategy and Europe 20/20. Today these reforms have become more urgent than ever.

According to Van Rompuy restoring economic growth is the main condition for restoring employment. But will work the classical model of economic growth to create employment once again, or has it become obsolete because of the globalisation? According to Bartho Pronk the political agreement on the introduction of a minimum wage by the German Coalition of christian and social democrats is a first positive step in the right direction. The minimum wages make it easier to watch over labour contracts. The minimum wage will also help the “working poor” to become less poor. However, Pronk notes in Europe a tendency “towards the abolition of the social security systems, without taking in consideration the vulnerable position of many people...The quality of our Western civilisation is under pressure, because self-interests and consumerism often replace an attitude of responsibility and participation.”

From right to left. Bernard Edmunds, Professor in Social Philosophy and Director of the Oswald von Nell-Breuning Institut, Frankfurt, Germany and Bea Cantillon, Professor at the University of Antwerp and President of the Centre for Social Policy Herman Deleeck. 

Most of the speakers at the seminar agreed that at the heart of the European Social Model should stay the social dialogue between the three stake holders: trade unions representing workers, employers organizations and governments. The social dialogue is a proper tool to regulate the ongoing conflict between capital and labour. Social dialogue brings social peace en economic stability. It is also a proper way to maintain solidarity between the individual (employed and unemployed) and the society, between those who have work and those who have not: the unemployed, the sick and the retired people.

But as already said, the model is under pressure. Capital is considered as more important than labour. The Anglo-Saxon model of a share holders economy displaces the Rhineland model of the social-market economy. Inequalities are becoming greater as a result of long term unemployment, new technologies, instability of families and globalisation with its delocalisation and flexibilisation. Jerome Vignon, chairman of the French Social week, insists that social priorities must be put above those of capital.

From right to left. Georges Dassis (Greece), President of the Workers Group of the Economic and Social Committee. Patrick Develtere, President ACW and Fritz Neugebauer, second President of the Parliament of Austria and President of the trade union GÖD.

By comparing the post war model of the USA with that of Europe, Professor Bea Cantillon of the University of Antwerp, concluded that the European Union must become a so called transfer union, a union of financial solidarity. The classical idea that economic convergence leads to social convergence, does not work. Europe has today a well developed common market but not a common social security system. Therefore a new European paradigm is needed: a European minimum wage must be introduced, the EU must become a transfer union of solidarity between North and South, West and East and there must be introduced a common social policy supervised by the EU like now has been developed for the budget policy of the EU members.

Professor Bernhard Edmunds is critical about the underlying concepts of the free market. Europe should not accept the classical liberal idea of maximum liberty for the individual and a minimum of state intervention. Europe must go back to the Social Christian thesis that human beings essentially are social beings. Therefore Europe as an economic community (common market) should also be a political community with social dimensions. In the same direction Patrick Develtere, director of ACW, advocates a more qualitative economic growth as the answer to the growing environment problems, the depletion of raw materials and the climate change, caused by human economic activities.

The idea of the European Union as a transfer union with shared financial solidarity, a more social Europe and a Europe with qualitative economic growth are today very contested by right wing politicians in many European countries. Their promise that going back to the old times of nationalism, autonomy, independence and no immigration will restore the national welfare state of the past, is believed by a growing group of voters. These voters see Brussels as a financial machine wasting their money and not anymore as a project for economic progress as stated by Van Rompuy. So van Rompuy was right to conclude that the next European Parliament elections in the month of May will become a test for he future of the EU.   

THE CONTINUING STORY OF THE EUROPEAN CRISIS

November is a true European crisis month. It started on November 14 with a day of action of the ETUC. In different capitals in the European Union strikes were held, demonstrations and manifestations against the austerity measures. For the occasion, the ETUC has issued a statement:

“The European trade union movement has for years been denouncing austerity measures. They are dragging Europe into economic stagnation and even recession. The result is that growth has stalled and unemployment continues to rise. Wages and social protection cuts are attacks against the European social model and increase inequality and social injustice. The International Monetary Fund (IMF)’s «miscalculations» have had an unbearable impact on the daily life of European workers and citizens. It brings into question the whole basis of austerity policy. The IMF must apologize. The Troika must revise its demands. Europe has a social debt, not just a monetary debt. The promised recovery has not happened. Twenty-five million

Europeans are out of jobs. In some countries, the unemployment rate for young people is over 50 per cent. The sense of injustice is widespread and social discontent is growing. We want action for sustainable growth and jobs. Not just words. The social situation is urgent.”

The ETUC proposes:

* Economic governance at the service of sustainable growth and quality jobs,

* Economic and social justice through redistribution policies, taxation

and social protection,

* Employment guarantees for young people,

* An ambitious European industrial policy steered towards a green,

low-carbon economy and forward-looking sectors with employment

opportunities and growth,

* A more intense fight against social and wage dumping,

* Pooling of debt through Euro-bonds,

* Effective implementation of a financial transaction tax to tackle

speculation and enable investment policies,

* Harmonisation of the tax base with a minimum rate for companies

across Europe,

* A determined effort to fight tax evasion and fraud,

* Respect for collective bargaining and social dialogue,

* Respect for fundamental social and trade union rights.

However, these proposals are still far away to be accepted. The Nordic European countries are resolutely opposed to the pooling of debt through Eurobonds. Great Britain rejects the idea of financial transaction tax as an intent to destroy London city as world financial centre. London city accounts for about 9% of the British gross national product.

The three important players in the European crisis. Left Mr. Europe the Belgian Herman van Rompuy, President of the European Council of European leaders. Next to him the French Cristine Lagarde, Director General of the IMF. On the left the Portuguese José Manuel Barroso, President of the European Commission.

In the meantime the so-called Greek debts crisis continues its own story. This month Greece needs another credit of  € 44 billion to keep its national economy going on. However, IMF and the EU don’t agree about the next steps. One agrees that the given time is too short for the reduction of the Greek debt to 120% of GDP. Therefore Europe is prepared to give Greece more time but this means extra money.  Who has to pay this? The IMF wants no more delays and calls for further debt cancellation. The European politicians find this unacceptable because, as they say, their voters do not want to spend a penny more on Greece.

The story continued Thursday 22 November with a strike of several thousand European officials. They don’t agree with the impending cuts in the EU budget 2014-2020. The officials are worried that the result will be a severe reduction of their wages. The unions point out that the cost of  Europe for its citizens amounts to only  67 cents per day while only 3% of the EU budget goes to salaries. According to the unions there has been savings since 2004 for an amount of  € 3 billion. Another 5% will be saved from now until 2020. The public has difficulties to take serious the strike of the European officials because they earn a lot compared to the officials in most European countries, while at the same time they pay only about 12% tax.

This week, European leaders negotiate the aforementioned European multiannual budget. Until now one could not agree on the budget increase to about €1000 billion. Net fee payers to Europe such as England, Denmark and the Netherlands are opposed. England and Denmark have already threatened a veto. The countries that receive more from Europe than they pay as fee want a budget increase. One wonders what will be the outcome.

If the budget does not increase, Europe will not be able to stimulate economic growth. As we know now this means another defeat for the ETUC that wants Europe to stimulate economic growth more than before.