Tight Times Force Europe to Reduce Social Spending AU REVOIR, SACRED COW

Article excerpt

IN Europe, the sacred cow of social services is no longer so sacred.

Recession is forcing national budget-cutters from Italy to Sweden to reduce social spending - an unthinkable step in previous decades.

* In Germany this week, the Cabinet approved a $12 billion reduction in social spending, primarily in benefits for the unemployed. The step, loudly criticized by the political opposition and trade unions, was taken to help bring Germany's ballooning budget deficit under control.

* On July 6, the Dutch parliament passed a stringent new law aimed at reducing misuse of disability payments. The Netherlands discovered it has 25 to 30 percent more people declaring themselves unfit to work than neighboring countries have.

* Since coming to power in March, France's new government has slashed $6 billion from its health-care spending by making patients pay for more of their medical costs.

The British are in the process of reviewing "everything" in their social benefits system, and even Sweden, king of the welfare states, launched a program of systemic reform last fall. Now Swedes receive smaller unemployment checks, slightly smaller pensions, fewer housing subsidies, fewer vacation days, and fewer paid sick days.

"The underlying growth of our social system exceeded growth in the economy. We can't afford it if it goes on," says John Bretherton, spokesman for the Department of Social Security in London. Even the Thatcher years could not contain the steady growth of Britain's welfare system, which now accounts for 30 percent of all government spending.

In the European Community, governments spend a major part of their budgets on social welfare, which accounts for 26 percent of EC gross domestic product. This compares with roughly 15 percent in the United States.

With the exception of Britain, though, no European Community members are looking at wholesale reform of their welfare systems, says Ralf Jacob, a specialist on social spending for the EC in Brussels. "There are calls for completely rethinking the welfare state," says Mr. Jacob, "but I don't see any member states carrying this out. …