Sunday, July 18, 2010

Are Europeans going conservative?

The FT (12 July) reports the results of its survey* which indicates an overwhelming support - from citizens in the largest five EU countries and the US -for the spending cuts made by European governments led by conservative governments, with the exception of Spain. It also highlights that aid to developing countries and defence - adding unemployment benefits in the UK- should bear the bulk of the cuts, but on the other hand, there was barely no support for cutting public expenditure on police, healthcare and education.

This 'fiscal conservatism' is largely influenced by the debt crisis which resulted in a rescue plan for Greece and a resolution crisis mechanism for any other euro area countries in default. This also reflects a fear from middle class citizens- who already lost a fraction of their real incomes over the last decade- for any further taxes which might result from a rise in public deficits. This appears to be a natural reaction to protect their incomes and savings as the crisis deepens.

This survey is in fact biased as questions were not addressed to a representative sample of the population in those countries. It depends who are the respondents : if you ask public servants affected by wage cuts, the answer would not be the same. In fact, we don't know who are the citizens who answered to the survey. But, more importantly, it is difficult to draw a conclusion that there is support for a review of Europe's social model, except perhaps the UK . We know that the majority of the population in France and Germany are reluctant to any cuts in healthcare and pensions.

In its last issue (17 July) , the Economist is even more contemptuous: "the ideal of progress has been a myth for longer than Europeans may care to admit". The argument is that social progress in Europe was just an illusion and that European countries were living beyond their means by financing their welfare State with hefty debts. It continues: 'Europe has put its values before growth'' [...] the euro-zone crisis has exposed such hypocrisy". And it concludes: " "It may still take time before Europeans conclude that they must compromise their ideals in order to secure the growth needed to preserve what they can of their lifestyles".

The European social model is often associated with social reforms, especially in France, such as retirement at 60 and the 35 hour working week agreed under a socialist government. Why is this not a mark of progress? In most European countries, labour is heavily taxed compared to capital and land. The scandal is to rescue banks which have made gigantic profits with derivatives and other speculative instruments to the detriment of entrepreneurs and workers. The issue here is again about social justice. No government should restore a situation just to continue rewarding greed instead of protecting their citizens. This message should be understood by European citizens.

* The FT/Harris poll was conducted on line among 6.164 adults aged 16 to 64 in France, Germany, Spain, the UK and the US, and adults between 18 and 64 in Italy between June 22 and July 1.

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