Europeans shift long-held view that social benefits are untouchable


Renault worker Florian Andre, 50, ponders his future at the car manufacturing plant near his home in Le Havre, France on Jan. 28. The Renault factory in Sandouville recently had to furlough employees for 70 days due to dropping demand. (Linda Davidson/THE WASHINGTON POST)
April 24, 2011

From blanket health insurance to long vacations and early retirement, the cozy social benefits that have been a way of life in Western Europe since World War II increasingly appear to be luxuries the continent can no longer afford.

Particularly since the global economic crisis erupted in 2008, benefits have begun to stagnate or shrink in the face of exploding government deficits. In effect, the continent has reversed a half-century history of continual improvements that made Western Europe the envy of many and attracted millions of immigrants from less fortunate societies.

In the new reality, workers have been forced to accept salary freezes, decreased hours, postponed retirements and health-care reductions. Employees at Fiat’s historic Mirafiori plant in Turin, rolling back a tradition of union privileges, even pledged to cut back on the number of workers who call in sick when the local soccer team has a match.

Unlike in the United States, where conservatives are so resolved to cut spending that they threatened a government shutdown, Western Europe’s generous welfare programs had generally been embraced by the right as well as the left. Against that background, the new wave of cutbacks seems to signal a dramatic shift in attitude toward benefits that many Europeans had come to see as a birthright and that politicians of any stripe could challenge only at the risk of their careers.

Many Europeans, particularly in left-wing political parties and labor unions, have interpreted the new winds as a triumph for ruthless free-market extremists who want to protect private wealth from higher taxes and as an aberration that can be undone by electing governments that are more worker-friendly. But many others, resigned to the new reality of globalization, have come to view the shift as the end of a golden era, perhaps never to be revived.

The social welfare system no longer plays its role, said Claude Bernard, a union organizer at Renault’s struggling car factory in Sandouville, a suburb of Le Havre in western France. The very system of redistributing wealth through taxes and welfare programs has been called into question.

In a measure of the shift, Manuel Valls, a presidential hopeful in France’s Socialist Party, challenged party doctrine recently by declaring that it should not make an issue of preserving the 35-hour workweek if French factories have to compete with Chinese factories where the workweek starts at 60 hours and goes up from there. In Denmark, Prime Minister Lars Loekke Rasmussen rattled many in that icon of Scandinavian cradle-to-grave welfare by suggesting Danes should work longer before retiring, to peel back the deficit by $2.8 billion.

Britain’s Conservative-led government decided in the fall to attack deficits by cutting more than $130 billion over the next five years, hitting welfare benefits hard and setting off protests by raising university fees.

But deficit pressures have forced leftist governments to seek savings as well. Some of the most painful cuts — pensions reduced, wages stalled and retirements pushed back — have been imposed by two Socialist prime ministers, George Papandreou in Greece and Jose Luis Rodriguez Zapatero in Spain.

“The world has changed,” said Michel Godet, a member of the French government’s Council of Economic Analysis who teaches at the National Conservatory of Arts and Industries.

Despite the crisis cutbacks, Western Europeans have retained a vast and often lavish social safety net. Although fees have risen in recent years, for example, most European universities remain faithful to the principle that higher education should be free — or at least cheap by U.S. standards. And as President Obama struggled last year to extend health insurance to more Americans, Europeans blessed with universal coverage shook their heads in wonder and even disdain.

“We are aware that France is one of the richest countries on the planet,” said Fabrice Le Serre, a colleague of Bernard’s in the General Labor Confederation at Sandouville. From the workers’ point of view, he explained, the problem is that welfare programs that have been expanding for 60 years have started to recede.

“We should continue trying to improve things, not move backward,” he protested.

New kinds of trade-offs

Florian Andre, a 50-year-old metal specialist at the Sandouville plant, has always viewed French social protections as a natural extension of the country’s human values. Slight and graying now with middle age, Andre was raised as a ward of the state. With help from generous government programs, he went on to a 30-year career as a skilled worker, blessed with a wife and three daughters and enough in the bank to buy a home in Le Havre once owned by a sea captain.

“With our system, we just don’t allow a widow or a child to end up in the streets,” he said. “Our social system should take responsibility for all stages of life, from the youngest age to the time of death. Of course, it’s a trade-off. Everything has a cost.”

But recently, the government has begun to trade off in a new direction, whittling away at services to save on costs. President Nicolas Sarkozy, a market-oriented conservative, has started to “unknit” the long-standing web of protections, Andre explained, using a term in vogue at his union, the General Labor Confederation.

Most markedly, he said, the government has shifted an increasing percentage of medical costs out of the national health insurance program and into the private complementary insurance that has become part of a new reality — at $68 a month per person in Andre’s case.

Deductions from his monthly check still amount to 23 percent of the total, leaving him with about $2,400 in take-home pay. But the curtailment of reimbursements has added a list of new health-care costs that have to come out of the family budget.

When Andre’s mother-in-law had an operation recently, for instance, the doctor charged $500 more than the national health insurance would reimburse. Andre’s private insurance shouldered only $40 of the difference, leaving the family to come up with $460.

Similarly, when his wife was operated on for a herniated disc, the doctor charged $200 more than the fee allowed by France’s national health insurance. Of that, his complementary insurance ponied up $40, leaving Andre to pay the remaining $160.

“Their main concern has become to save money,” he complained. “And they have erected new barriers to getting treatment.”

Sarkozy’s program of not replacing one of every two retiring civil servants has meant that the health insurance administration is overtaxed, leading to long delays in handling reimbursement requests, he added. Moreover, cost-cutting programs have led to the closure of neighborhood offices and the creation of large, impersonal regional centers.

The approach is a far cry from the tradition Andre thought was a national treasure never to be relinquished. When he was young, he recalled, not only were medical costs paid without question, but medicine prescribed by the doctor was also eligible for total reimbursement.

“Now,” he smiled, “you have to be almost dead to get a 100 percent reimbursement.”

Privileges have become a ‘ball and chain’

France, emblematic of Europe’s social advances, has considered a generous protection system part of the landscape ever since Charles de Gaulle embraced a program put forward by Communist resistance groups immediately after World War II. With subsequent additions under the Socialist Party’s two turns in power since then, including the 35-hour workweek and more vacation time, the welfare state has since been taken to a level that made this country the envy of many.

When the global crisis hit, the French social protection net — which helps push government expenditures to 54 percent of gross domestic product — cushioned people from the worst effects. But now, as Europe struggles to return to growth, conservatives in and outside the government have said the protections are threatening the health of public finances and holding back the economy.

Godet, the economist, calculated that with a legally mandated five weeks of vacation, national holidays and compensatory time off for working more than 35 hours, French workers and functionaries have accumulated 55 days a year in paid time off. Combined cleverly with “bridges” over workdays that fall between off days, he found, that in effect gives them a week off every month.

As a result, he said, French workers on average show up at the office or factory 620 hours a year, compared with about 700 in Germany and 870 in the United States. Also as a result, an hour of work costs $43 on average in France, compared with $36 in neighboring countries that also use the European currency, the euro, giving those other countries, particularly Germany, the edge in globalized competition.

“The problem we have is that we can’t get people to understand that these privileges are in fact a ball and chain,” Godet said.

Sarkozy’s government, in seeking to persuade the population that change must come, has emphasized the ballooning costs of health care and retirement pensions as the main culprits in a 2010 deficit amounting to more than $200 billion, or 7.7 percent of the gross domestic product. Health insurance alone accounted for $30 billion of the shortfall.

But Sarkozy also revamped the pension system last fall, tightening early-retirement rules and raising the benchmark retirement age from 60 to 62 despite howls from unions and left-wing political leaders. In explaining the shift, he said a rising number of long-lived retirees, combined with a smaller base of active workers to pay into the system, had forced the government to rely increasingly on borrowing to keep the system afloat.

As the global crisis exacerbated deficits, leading to collapses in Greece and Ireland, he said, France found it could no longer run up more debt to keep the pensions coming.

“People began to understand that the whole system could come crumbling down,” Godet said.

Sarkozy’s opposition on the left accused him of betraying the national consensus begun by De Gaulle in 1944, asserting that the debt burden should be lightened instead by forcing the rich to pay more taxes.

“Don’t talk to me about the public deficit,” shouted a woman at an anti-government rally in Concarneau, on the Brittany coast, organized by the Association for the Taxation of Financial Transactions and Citizen Action (ATTAC). “No, there is no public deficit. There is just the possibility for the powers of big money to redistribute, to give money back, and so on.”

The Socialist Party and other leftist groups have interpreted such outrage as a chance for change in the next presidential election, in 2012. “Something is happening,” predicted Youenn Le Flao, who heads Concarneau’s ATTAC branch. But it remains to be seen whether the indignation will translate into votes against Sarkozy when he seeks reelection to a second term.

One indication came when France’s highly politicized labor unions staged a series of general strikes and massive demonstrations in the fall to try to stop the change in retirement age. From the beginning, Sarkozy’s majority in parliament meant passage was assured, infusing the protests with a dispirited tone. Soon after the final vote in October, they sputtered out entirely, and the president’s conservative backers suggested the 35-hour workweek should be the next target.

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