January 17th, 2014
in Op Ed
Yes, w€ can!
by Dirk Ehnts, Econoblog101
UK chancellor George Osborne a speech recently, according to the Guardian:
"As Angela Merkel has pointed out, Europe accounts for just over 7% of the world's population, 25% of its economy, and 50% of global social welfare spending. We can't go on like this."
To which I would like to see the continent stand up and say: "yes, we can!" And we should - given that the 93% of the world's population is looking up to our standards of social security, health care and pension systems. Why can't we afford what we used to?
The problem is the way the euro is set up. Before the euro, governments could not technically go broke. They could always issue sovereign debt and get money for that from the national central bank. Hence they were able to finance whatever welfare spending the electorate decided upon. No more. The welfare spending in Spain is decided by markets, not by the public. Are you sure you want to live in a world in which financial markets (or, after a financial crisis, the utterly undemocratic troika) decide the size of social spending and not the electorate?
By the way: the SPIEGEL reports that German welfare spending has reached record levels in 2012 (numbers for 2013 are not in yet): €782.4 billion. That is about thirty percent of German GDP. Oh, and this will be stable, as the forecasts predict a rise in welfare spending to €905.2 billion in 2017. I think now I understand what Martin Wolf in today's FT means in his column titled 'Failing elites threaten our future'. Well, not the future of everybody, perhaps...