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Europe's balancing act

The 'social model' is fraying, but the Continent is wary of raw capitalism. So now what?

By Staff writer of The Christian Science Monitor / June 2, 2005


For decades, European leaders have proudly offered their "social model" as a beacon to the world, marrying free markets with strong welfare systems to guarantee their citizens both prosperity and security.

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But as the Continent ponders its future in the wake of voters' rejection of a European Constitution that sought to balance those two goals, the European model is fraying at the edges. Profound disagreement exists over how to make it meet the demands of a rapidly changing world.

On the one hand, nudged by the European Union (EU), every European government has agreed - in principle - on the need for reforms to deregulate their economies and unleash their competitive potential.

On the other hand, growing numbers of voters in some of Europe's biggest nations are resisting such moves as a threat to their lifestyles, and demanding continued state benefits and job security.

With 19 million unemployed in the EU, and populist anti-immigrant politicians eager for their votes, the debate over how to stimulate Europe's sluggish economies holds implications for Europe and beyond.

One constitutional phrase, guaranteeing "free and unfettered competition" across the EU economy, generated especially strong hostility in France.

Jeremy Rifkin, author of "The European Dream" and adviser to European Social Democratic governments, worries that the debate has been limited to a contest between unfettered market capitalism and democratic socialism. "Europe has lost sight of the need for a model that stimulates the market and understands its failure to distribute wealth fairly," he argues.

That was exactly what the "social market model" was meant to do. But under the pressure of global competition, it is under fire from both right and left, for being either too social, or too market oriented.

For Ann Mettler, cofounder of the "Lisbon Council," a proreform group based in Brussels, France's 10.2 percent unemployment rate is due to "the lack of reform" of rigid labor laws, high employer taxes, and generous welfare payments.

For ATTAC, the international left wing "alternative globalization" movement that opposes the EU Constitution, mass unemployment can only be countered by "breaking with neo-liberal economic policy" and reversing such minor reforms as have been made in France and Germany, says ATTAC spokesman Christophe Aguiton.

Five years ago, the 25-member EU set itself an ambitious set of targets known as the Lisbon Agenda, pledging to create "the most dynamic and competitive knowledge-based economy in the world" by 2010, while preserving high levels of social welfare and environmental protection.

Few governments did much about the program, however, and it has riled trade unionists. The problem, complains Lena André, deputy General Secretary of the European Trade Union Confederation, is that "the agenda has not been pushed in a balanced way. A lot of demands have been put on workers, and fewer on employers."

The reform medicine is especially bitter, Ms. Andre points out, when it does not appear to work. Welfare cuts in Germany have helped push Chancellor Gerhard Schröder's popularity rating down to 28 percent, but they have yet to reduce the country's 11.8 percent jobless rate. "We have to adapt to change, but it should not be only at a social cost," Andre argues.

Some European countries have shown the way: Finland, Sweden, Denmark, and Norway are all in the top six on the World Economic Forum's list of most competitive economies, while maintaining their famed social welfare programs.