There’s a frontpage story in today’s Washington Post that deserves more attention. Here’s the lede:
ATHENS — The massive emergency fund assembled to defend the value of the euro is backed by a political gamble with an uncertain outcome: that European governments will rewrite a post-World War II social contract that has been generous to workers and retirees but has become increasingly unaffordable for an aging population.
But this is the money part:
“We can’t finance our social model anymore — with 1 percent structural growth we can’t play a role in the world,” European Council President Herman Van Rompuy said Monday in remarks at the World Economic Forum in Brussels, just hours after European Union finance ministers approved the new program. European growth rates are lagging behind those in the United States and the rest of the world as the recovery takes shape, with Spain and Greece still in recession.
Access to the fund will be conditional: Countries that think they need help will have to show they are willing to make the changes needed to bring their deficits under control, similar to the process Greece went through in arranging a $140 billion bailout.
But the political challenge looms large, cutting to the heart of Europe’s postwar identity. Particularly in the south, unions and socialist movements have established generous work rules and social welfare programs.
According to Paul Krugman et al., this is heresy. Europe is the “comeback continent” and proof that “social democracy works.”
Funny, even as this adminstration is rushing toward social democracy, social democracy is running off a cliff over on the “comeback continent.”