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What’s wrong with Europe

Posted by Richard on June 3, 2005

Things don’t look good in Europe right now. Voters in France and the Netherlands have rejected the EU constitution. Unemployment is high, growth stagnant. The mood of the public, at least in old Europe, isn’t good. The Euro has already fallen about 10% against the dollar this year, and the anti-Euro rumors and grumblings are accelerating:

LUXEMBOURG (Reuters) – Luxembourg Prime Minister Jean-Claude Juncker, who holds the European Union presidency, warned on Friday that failure to agree on a new long-term EU budget this month would turn a political problem into a full-blown crisis.

Juncker, who also chairs euro zone finance ministers, said the single currency shared by 12 EU countries had been weakened by the "No" votes to the European constitution in France and the Netherlands but was still overvalued compared to the dollar.

TOKYO (Reuters) – The euro fell sharply against the dollar on Friday after reports that an Italian minister said Italy should consider quitting the euro and returning to the lira.

 BERLIN – The president of Germany’s central Bundesbank on Wednesday rejected as "absurd" a report saying he had taken part in a meeting at which the possible collapse of the euro was discussed.

Stern magazine based the story on what it says are secret minutes it obtained of a meeting last week between Eichel and Weber. 

 An opinion poll conducted for Stern showed 56 percent of Germans want to ditch the euro and bring back the D-mark.

So what’s the real problem? David Brooks says (NY Times link; log in with BugMeNot) the Europeans are reaping the consequences of adopting the policies that American liberals point to as evidence of European superiority and urge us to adopt:

Most of the policy ideas advocated by American liberals have already been enacted in Europe: generous welfare measures, ample labor protections, highly progressive tax rates, single-payer health care systems, zoning restrictions to limit big retailers, and cradle-to-grave middle-class subsidies supporting everything from child care to pension security. And yet far from thriving, continental Europe has endured a lost decade of relative decline.

Brooks notes that Europe’s economic malaise has been going on for some time now. Since 1991, unemployment in continental Europe has remained in the 8-11% range, and growth has been below 3% in 13 of those 14 years. Their standard of living is a third lower than ours, and the gap is growing. Their output per capita is lower than 46 US states, about equal to Arkansas’. And people are right to be pessimistic because it’s likely to get much worse:

Once it was plausible to argue that the European quality of life made up for the economic underperformance, but those arguments look more and more strained, in part because demographic trends make even the current conditions unsustainable. Europe’s population is aging and shrinking. By 2040, the European median age will be around 50. Nearly a third of the population will be over 65. Public spending on retirees will have to grow by a third, sending Europe into a vicious spiral of higher taxes and less growth.

But Brooks thinks Europe’s problems go beyond economics (emphasis added):

Over the last few decades, American liberals have lauded the German model or the Swedish model or the European model. But these models are not flexible enough for the modern world. They encourage people to cling fiercely to entitlements their nation cannot afford. And far from breeding a confident, progressive outlook, they breed a reactionary fear of the future that comes in left- and right-wing varieties – a defensiveness, a tendency to lash out ferociously at anybody who proposes fundamental reform or at any group, like immigrants, that alters the fabric of life.

This is the chief problem with the welfare state, which has nothing to do with the success or efficiency of any individual program. The liberal project of the postwar era has bred a stultifying conservatism, a fear of dynamic flexibility, a greater concern for guarding what exists than for creating what doesn’t.

Brooks sounds like he’s been reading Virgina Postrel’s The Future and Its Enemies. As should you.

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3 Responses to “What’s wrong with Europe”

  1. Anonymous said

    When I heard that two countries failed to ratify the new coonstitution, I thought it was because they looked to America and saw how our ‘loose’ federation of states soon became a single state with an overbearing central government that tells us what medicenes we can take, how fast we can drive, what to teach our children, no matter what our state laws say.

    In truth, that seems only one of the reasons. Two other reasons, though really tied to the issue above were covered by public radio. The Netherlands voted it down because they fear they will have to pay to hold up other countries who are poorer. France feels that their culture and language might be lost. What NPR didn’t cover as much was the reasons you have listed above, though to their credit, they did say unemployment has been at 10% for a decade or more.


  2. James said

    There are many points you raise that I agree with-the huge problem of immigration in Europe which has come about through inaction on behalf of Europe’s leaders but I have to take umbrage at the other points, which smack of jealousy, igmorance and the deliberate twisting of facts on your part. Having lived in the States and seeing the most desperately ill and poor wandering the streets, the lies your TV programmes come up with about global news (if and when it’s covered at all) and the constant remarking that the European countries are suffering decline when they are, for the most part, remarkably buoyant given the circumstances and do not owe the world trillions of dollars like one country I can mention, I wonder what awful world you would have us live in. It is NATURAL and HUMAN to have a reasonable holiday period, to want a nd care for our fellow man. The greed and selfishness of a money-orientated society like the US where no-one cares for anyone but themselves has no place in a future world. Europe may not have it right but it’s wayyy ahead of anywhere else in the world.

  3. rgcombs said

    ”(The following comment from Karl at was accidentally deleted)”

    James, most of those homeless people wandering the streets are only doing so because they are drunks or drug addicts, or don’t want to put up with the rules of the homeless shelters. There are some with placards up that claim they will work for money, but most of them are full of shit. The wanderers with mental illnesses should definitely be taken care of, but many homeless are not mentally ill.

    Besides, I see hundreds of jobs posted in every local newspaper, which means that there are numerous vacancies for work.

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