Living standards to fall for many Europeans

VILNIUS - The generous social contract that the Europeans have celebrated for decades is being challenged, and “Across Europe…the assumptions and gains of a lifetime are suddenly in doubt. The deficit crisis that threatens the euro has also undermined the sustainability of the European standard of social welfare, built by left-leaning governments since the end of World War II,” says Steven Erlanger in a recent story in The New York Times, reports news agency LETA. Even America’s left-leaning admirers of the European project concede that the EU’s member states cannot continue spending more than they make, and should the euro take a further plunge, another global financial meltdown cannot be discounted.

Europe has been plagued by sluggish growth, low birth rates, an aging population and declining tax revenues, so all European governments are now finding it difficult to provide economic security and high living standards that its citizens have taken for granted in Western Europe, or to which they aspire in Eastern Europe. Consequently, Europeans are faced with solutions to their economic woes that are common in the U.S.: longer hours at work, fewer fringe benefits, shrunken holidays, later retirement, and Spartan subsidies for child care. In sum, should they continue to face economic austerity a growing number of Europeans who have not had the opportunity to travel to the New World will now have America brought to them.

Europe’s economic crisis is no joke. Austerity will diminish the living standards of a growing number of Europeans, and those who suffer most may provide the fuel for serious social unrest and political instability. Joschka Fischer, the former German foreign minister, has observed that social peace depends upon economic security for the continent’s residents. “Europe won’t work without that,” he says. A viable welfare state, he warns, “is a matter of national security.” Fischer predicted the rioting in the streets of Athens that produced three deaths, which may represent the first warning sign that the worst is yet to come, not only in Greece but in other countries that face serious fiscal problems: Ireland, Spain and Portugal, for example.

At the same time, there are signs of growing enmity between the ‘Northern tier’ of states such as Germany, and the ‘Mediterranean arc of states,’ that include Greece, Italy, Portugal and Spain. Such friction foretells serious threats to EU solidarity. Germans also resent that they pay their taxes and work long hours while the Greeks snub the tax man and enjoy extended sun-drenched coffee breaks and early retirement at the expense of Nordic workaholics.

There is also a Trans-Atlantic dimension to this enmity as Americans complain that they provide national security protection at a bargain price, not to mention the lives of their youth, to the Europeans who have the audacity to complain that President Barack Obama is asking too much of them when he requests more European help in Afghanistan. After all, residents of London and Madrid have been targeted by jihadist maniacs, not only New Yorkers and residents of the Washington suburbs.

It is against this backdrop of economic gloom and social and political unrest that explains why the EU is at a pivotal cross-roads. There is growing belief that unless there is a single executive authority in Brussels and members of the eurozone play by the same rules, the euro remains at risk and its volatility threatens a new international financial crisis. Every country that belongs to the currency zone must have identical obligations regarding the payment of taxes and strict controls on deficit spending or the system may implode.

Of course, what is involved here is nothing less than diminished sovereignty for the EU member states at a time when we are witnessing a ‘re-nationalization’ of policy in the halls of the EU. Indeed, citizens of the disparate countries that comprise it have been demanding fewer Brussels-mandated rules, not more dictates from that quarter.

It is understandable why many Europeans do not want to sacrifice their cultures, languages and unique national life-styles to decisions that ‘over-paid bureaucrats’ in the Belgian capital wish to impose upon them. But alas, as a growing chorus of commentators in Europe and abroad have observed, there will be no end to Europe’s economic crisis until it addresses the daunting problem of governance. The pivotal question here is, can Europe enjoy viable economic prospects in the midst of expanding political fragmentation?

Clearly, the disruptive challenges of globalization compel Europe to adopt political institutions that are consistent with a federal system where its component parts have control over “local” matters like educational and cultural affairs, while a powerful executive manages a network of economic institutions that provide for strategic planning and uniform policy implementation in monetary policy. What is more, given the close linkage between economic practices within Europe and the world economy at large, it is imperative that the EU possesses a unified foreign policy.

While pundits dwell upon opposition to a strong Europe on the part of the newer, poorer members of the EU, it is even more problematic whether or not the richer countries like France, Germany and the UK are prepared to sacrifice their sovereignty to create a more coherent EU governmental structure. The ruling elite in all of these countries may well settle for the status quo, since they have the wealth to weather the storm.

It is uncertain what the outcome of the euro crisis will be, but Lithuania must put its economic house in order and its political leaders must courageously adopt bold policies that powerful interests resist. A prime example here involves the issue of property taxes. All major Western countries rely upon them to provide for public services, though Lithuania is not among them. President Dalia Grybauskaite in her state of the nation address warned about the cancer of corruption and urged government not to ignore the welfare of the individual person. But one of the major reasons why doctors, law enforcement officials and teachers accept bribes is that they do not receive adequate compensation for their work. By taxing property, revenues will be provided that help them meet their economic obligations to their families and, in turn, strike a significant blow against corruption.

Of course, much more must be done to fight it but by easing the financial burden of ordinary Lithuanians, the nation’s leaders will demonstrate that they truly are concerned about what the president has called the “forgotten individual person.” This, in turn, will help reduce the widespread curse of political alienation that is so pervasive in Lithuania and that feeds corrupt behavior and contempt for the law. Finally, if gross economic insecurity persists, the most privileged members of Lithuanian society, those who deem corruption merely “the cost of doing business,” may one day discover that they and their children live in a country where no one is secure.