Euro crisis 'spells the end of welfare states': Post-war system in ashes, warns U.S. thinktank







The welfare states of Europe that rose out of the ashes of the Second World War are now facing destruction because of the sovereign debt crisis, analysts say.

The troubles that began with the collapse of Greece and which now threaten the euro spell the end for excessive and occasionally corrupt welfare systems, they say.

The pronouncement from a highly regarded U.S. think tank reflected popular opinion across northern European countries.

German Chancellor Angela Merkel, centre, who has been battling to save the euro

Uri Dadush, of the Carnegie Endowment's International Economic Programme, said: 'The current welfare state is unaffordable.

'The crisis has made the day of reckoning closer by several years in all the industrial countries.'

The verdict follows the surprise in the U.S. caused by the discovery that the average age of retirement in Greece is 53, thanks to a generous benefit system and pensions for state employees.

It symbolised the unaffordability of the welfare states set up across Europe from the 1940s onwards with the aim of suppressing popular unrest and paying off tensions that could lead to another continental war.

Other recently discovered welfare state provisions that also look too generous to transatlantic eyes include the German unemployment benefit provisions.

Under these, sacked workers under the age of 50 can collect 60 per cent of their last pre-tax pay packet from the state for a year after losing their job.



Chancellor Angela Merkel's government is to decide next month on schemes to cut £3billion from its budget, with cuts to unemployment pay on the agenda.

She has promised to protect education from cutbacks, but there is pressure to ask German students to pay more.

At present some German states provide university education free, and none charge more than £1,000 a year in tuition fees.

In France, meanwhile, there are looming moves to cut the cost to the state of pensions. State workers can retire at 60 on half their average lifetime salary.

There are higher pensions for civil servants, military veterans, and those who have raised at least three children.



Southern European countries with similar economies to Greece and welfare systems sometimes as generous also look poised to rein back.

Spain has already cut a £3,000 state payment to parents of newborns. It also proposes to push up retirement age from 65 to 67.

Alongside raising retirement ages so that no one can leave work before 60, Greece plans to insist that workers pay into their pensions for 40 years before they can take an income from them.

Greece also plans to end lavish perks for civil servants, including two extra months' salary paid to those on £3,000 a month or more.

Professor Iain Begg of the European Institute at the London School of Economics said: 'There has been a lack of willingness to shift away from welfare as social protection towards an approach seen in northern Europe ... which is welfare as social investment.'