Dead Man Walking

Expensive, Antiquated European Welfare System On Last Legs

(CBS)  Tom Fenton, in his fourth decade with CBS News, has been the network's Senior European Correspondent since 1979. He comments on international events from his "Listening Post" in London, and other parts of the world as well.

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German retiree Rolf J. (last name withheld) is in trouble. The state government of Lower Saxony had been paying his $875 monthly rent in Miami since last year, after a German court ruled that he suffers from depression and “needed to continue living in familiar surroundings.” Germany’s welfare system was forced to foot the bill.

But now under a new German law, he no longer qualifies for housing payments because he has lived abroad for more than two years. The case of “Florida Rolf”, as he became known to millions of Germans after newspapers published his story, is symbolic of what is happening to Europe’s long and sacrosanct tradition of the welfare state.

Germany is trying to trim one of the world’s cushiest welfare systems, which for years paid for such goodies as free massages and visits to health spas. The planned cutbacks are not going down well with the public. Hundreds of thousands of Germans recently took to the streets to denounce what labor leaders called “social demolition.”

So far the left-center government of Chancellor Gerhard Schroeder has not backed down. The German economy is stagnating under heavy taxes. Economists say it can no longer afford the German model of the welfare state, so Schroeder wants to introduce higher health care fees, lower retirement and unemployment benefits, looser job protection laws and income tax cuts.

Germany’s problem is echoed throughout Europe. The French economy is also stagnating under rigid laws that limit the work week to 35 hours and pile high payroll taxes on employers that more than double the cost of labor. The right wing French government would also like to cut back on the welfare state, but has lost its nerve under the onslaught of a wave of protest strikes.

The problem of the cost of the welfare state has become so acute throughout Europe that a group of government and business leaders actually discussed “the end of the welfare state.”

Meeting in Warsaw during the European Economic Summit organized by the World Economic Forum, they concluded that the current European system of welfare is no longer sustainable. One participant described it as “the walking dead.”

Among the reasons they gave is the catastrophic demographic trend in Europe. Its generous cradle to grave welfare system was created at a time of population growth. But an alarming drop in fertility that began two decades ago has almost doubled the ratio of retirees to active workers.

Simple arithmetic dictates that Europeans will have to increase the retirement age and welfare benefits will have to be cut back to more affordable levels. The biggest problem, everyone agreed, is political: the political will of governments to push through “reforms” (as cuts are usually called). In the near future, the most likely scenario is that European governments will continue to tinker with the welfare state, but fail to carry through the drastic changes that eventually must be tackled.

In the meantime, all is not lost for “Florida Rolf.” If he wants the government to continue paying his rent, he can always move back to Lower Saxony. It may not be as sunny there, but what he saves in rent could even pay for an occasional Florida vacation.