Recession rocks Western Europe's welfare states

For decades West Europeans competed with each other to build the ''model'' welfare state. Sweeping programs of ''social insurance'' - from generous unemployment benefits to almost limitless free health care - were built on a foundation of economic growth.

Today that foundation is shaken. Growth has halted, or slowed to a trickle. And as the recession bites deep from one end of Europe to the other, a new race has started . . . to slash welfare budgets.

It foreshadows potentially significant social and political change. But the key immediate challenge facing governments today, according to many observers, is to trim their welfare budgets without trimming their electoral support.

''Many governments would find themselves out of office if they were to cut welfare payments too drastically,'' says one political analyst. ''There's no question the welfare system has become something sacrosanct since the war. But at the same time, if they don't reduce public spending - a large chunk of which goes to the welfare systems - their economies could collapse. And that would also put the governments out on the street.''

Just how Western Europe's welfare systems will eventually be rebuilt will vary from one country to another. For now, the catchword is cut.

The pruning shears have been wielded primarily (and not surprisingly) by conservative and center-right governments in Britain, West Germany, the Netherlands, Belgium, and Denmark. But even in socialist France, the shears have begun to prune a blossoming welfare budget deficit now exceeding $4 billion a year.

In the Netherlands, the new center-right government (sworn in earlier this month) has set as one of its priorities saving $1.4 billion next year alone by cutting some social security benefits and freezing others, and by chopping some health-care subsidies. Premiums will also be raised.

In Britain, where Conservative Prime Minister Margaret Thatcher saved the government more than $2 billion by slashing unemployment and family benefits in her first year in office (1979), a debate has opened over how much more will have to be cut from the welfare budget. Most agree cuts will have to be made.

Social benefits and the nationalized health service now take more than $8 billion a year from the British government till, accounting for 40 percent of government spending (against only one-third in the late 1970s).

For its part, the new West German government of Chancellor Helmut Kohl announced plans to cut public spending, including outlays for welfare, less than a month after taking office in October. Labor Minister Norbert Blum, however, rejected proposals by Economics Minister Otto Lambsdorff to reduce unemployment and other social benefits, pledging instead to delay pension increases, tighten up on student loans, chop child-welfare benefits, and boost insurance premiums for the elderly.

''We are faced with only one choice,'' Mr. Blum said recently, ''caution or demolition. And as I am against the demolition of the social welfare system, I regard a breathing space as absolutely necessary.''

In Belgium, the center-right government has been encountering stiff public resistance recently to its new austerity program. This includes freezing for two years state-supported insurance schemes for doctors and health workers, cutting family allowances, and reducing the number of hospital beds in the country by one-quarter.

And in Denmark - once the model-of-models for the rest of Western Europe - Poul Schluter, the new conservative prime minister, has pushed through a plan aimed at cutting public spending next year by about 7 percent - almost entirely at the expense of the welfare system.

''People will not take lightly to seeing their welfare benefits dwindle away, '' says one analyst. ''Once those cuts start taking effect, we can expect to see some public unrest - if not outrage.''

Taking a slightly different tack is Ivor Richard, European Community social affairs commissioner. ''On the face of it,'' he says, ''the public reaction could be nil. After all, many of the cutbacks will affect the least vocal and least organized members of society - the sick and the elderly.

''On the other hand,'' he told the Monitor in an interview here, ''the 11 million unemployed, whose number could grow to 15 million by the mid-1980s, are organized, young, and fit. They are not going to take the cutbacks sitting down.''

Some experts add that the cuts will have to be accompanied by an upturn in the economy. Otherwise, they say, government credibility will suffer and public protests will mount.

''It's the economic crisis that's been at the heart of the problem, and not any faults inherent in the welfare systems themselves,'' says Mr. Richard.

It was a recent paper written by European Community experts at Richard's request (''I want to engage the EC member countries in a discussion to find a European solution to the problem'') that emphasized the point that the postwar ''obligation'' of European governments to provide their citizens with comprehensive social insurance programs rested on a foundation of continuing economic growth.

Today, not only has that growth disappeared, but even while it was slowing down governments continued to pump money into their welfare systems so that national welfare expenditures in the EC have risen to an average of one-quarter of gross national product, up from one-fifth a decade ago.

Also working against the welfare systems have been the falling birth rates throughout West Europe. This has combined with the recession to lead to fewer workers supporting for example, more than 10 percent of the population that is either unemployed or over 75 years old.

Over the next few months, the debate over the role the welfare system should play in modern society is expected to intensify, pitting those who believe the system to have been at the core of West Europe's inability to successfully absorb the post-1973 oil-price shock against those who feel that to abandon the system now would be abandon the only stabilizing factor in an otherwise gloomy social and economic landscape.

The EC Commission, urged on by Mr. Richard, has sided with the latter school. It states in its recent paper that ''social protection is a precondition for maintaining a high level of skills, efficiency, and motivation in the economic life of Europe.'' Moreover, it says, ''the amounts levied do not drop out of the economic circuit'' but help to maintain economic activity.

To complement the current welfare-cutting craze, the Commission is suggesting that the EC governments begin looking at ways to streamline the systems to avoid overlapping administrative costs and minimize waste, review the means of financing the systems, find means for eliminating abuse, and make the systems more flexible, allowing them to adapt more readily to changing needs.

Is the crisis temporary?

''Absolutely not,'' Mr. Richard answers without hesitation. ''It's not simply a matter of holding our breath while we get through the recession. The problem will be with us for some time to come. And the answers will not come easily.''

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