Blair Takes A Risk: This Could Be Very Interesting

[Annie]

http://washingtontimes.com/upi/20050704-123546-6945r.htm

United Press International

Analysis: Reforming Europe's social model

By Gareth Harding
UPI Chief European Correspondent
Jul. 4, 2005 at 1:16PM

British Prime Minister Tony Blair has never been one to shy away from discussions about taboo topics, so it was hardly a surprise that on the first day of the U.K. presidency of the European Union Friday, he called for a special summit of leaders in October to debate the European social model.

"Obviously it is taking something of a risk to go right to the heart of the issue of the social model, but I think it is sensible to do it," he told reporters in London. "Everybody knows that that is the debate that is going on in Europe, so let's have it."​

The European social model is an elusive concept, but probably best described by U.S. author Jeremy Rifkin in his best-selling book "European Dream."

"The American dream puts an emphasis on economic growth, personal wealth and independence," he writes. "The new European dream focuses more on sustainable development, quality of life and interdependence." Americans, says Rifkin, live to work, whereas Europeans -- with their six-week vacations and 35-hour working weeks -- work to live. Another fundamental difference is welfare provision. Most Europeans accept high taxes and lower growth as a price to pay for cradle-to-grave social security support, free healthcare and education, subsidized public transport and strict environmental standards, whereas Americans tend to favor low taxes over high government spending.​

Few EU decision-makers want to abandon a social model that has become almost synonymous with the European way of life, but some are beginning to question whether it is sustainable given the club's dwindling workforce, ageing population and sluggish growth rates. Modernizers like Blair also wonder how Europe can compete against emerging economic giants like China and India, not to mention the United States, with high taxes, restrictive labor laws and tightly-regulated markets.

"Some have suggested I want to abandon Europe's social model," Blair told the European Parliament last month. "But tell me: what type of social model is it that has 20 million unemployed in Europe, productivity rates falling behind those of the United States; that is allowing more science graduates to be produced by India than by Europe; and that, on any relative index of a modern economy -- skills, R&D, patents, IT -- is going down not up."​

Without radical reform, the future does indeed look bleak for Europe's social model. India will expand its biotechnology sector fivefold over the next five years, China has trebled its spending on research and development in the last five, while of the top 20 universities in the world today, only two are now in Europe, Blair noted in his Strasbourg speech.
Then there is old Europe's demographic time-bomb. The ratio of those in retirement compared to those at work is expected to double from 24 percent today to 50 percent in 2050. This will not only lead to even lower growth rates -- a full percentage point a year according to the European Commission -- but significantly higher spending on pensions and healthcare.
There are two obvious solutions to these problems: increase immigration on a massive scale -- some 50 million migrants will be needed by 2050 just to keep the EU's population stable - and increase taxes to pay for the welfare bill of an ageing population. The problem is, neither of these solutions is popular with the electorate or sustainable in the long term.
Even ardent supporters of the European social model agree the status quo is not an option. "We will have to give up some of our benefits," says Giampiero Alhadeff, secretary general of the Brussels-based advocacy group Solidar. "We cannot go on leaving work at 60 and workers are going to have to be more flexible if the state offers more employment and education opportunities."
Try telling that to French workers, who overwhelmingly rejected the EU's first-ever constitution in May precisely because they feared it would destroy their cherished social model. Hopes of reform are equally bleak in Germany, Europe's biggest economy. The main reason Chancellor Gerhard Schroeder is likely to get booted out of office in September is not because his welfare reforms have been too timid, but because they are viewed as too radical.
Blair fears unless European leaders arrive at a consensus on how to update the bloc's social model in October, extremists will hijack the policy debate and scupper any chance of reform -- as occurred in France when an unholy alliance of far-right racists, unreconstructed communists, anti-globalization activists and trade union militants torpedoed the EU constitution.
"If the sensible moderate people at the centre ground don't grasp the challenge of change, what happens is extremes start peddling solutions to the public that are actually no real solutions at all but have a certain appeal," the Labor leader told reporters Friday. "People say well the problem is all immigration, or the problem is all globalization, and you end up with the extremes on left and right taking the agenda."
The commission has been charged with drawing up a policy paper on how to sustain the European social model in time for the London summit in the fall. However, even the EU executive is aware of the challenge it faces.
"There is no one single European social model," says chief spokesperson Francoise Le Bail, "and the commission has no magic formula for what is an extremely complicated subject."
Standing side by side with Blair Friday, European Commission President Jose Manuel Barroso bluntly reminded legislators that "to have an ambitious social model we need growth." The problem for both Blair and Barroso is most social, economic and employment policy is set in national capitals, not Brussels. So while earnest declarations about the importance of boosting growth and modernizing Europe's social model are likely to result from the October summit, forcing member states to make the reforms necessary to meet these laudable goals is likely to be much more difficult.