European Economic Growth: Spend, Spend, Spend

Is the European Union an ambitious project which has so far failed to deliver the expected economic results? Europe wants to play a significant role in a world increasingly dominated by big economic and political blocks. Its role as a union was implicitly recognised by President George Bush who chose Brussels, rather than Paris or Berlin, for the start of his recent European tour. However, the vision of the continent as a leading power is at odds with the sentiment of its people who are concerned for their jobs, living standards and future. Europe must do better.

The World Today
4 minute READ

Dr Paola Subacchi

Former Research Director, International Economics

Despite its potential, Europe’s economy is weak compared with other existing or emerging powers.

Structural reforms are progressing at a painfully slow pace. The widening gap between economic goals and dismal performance has adversely affected the credibility of European institutions.

The individual is burdened with relative high taxes – on average the top rate of income tax is around forty percent. The labour market is stagnant – young people in areas with too few suitable jobs may face years of precarious employment and uncertainty. Pressures to reduce budget deficits and put public accounts on a sustainable basis point to further cuts in public spending or tax increases – or both.

The slow reform of the welfare state and pensions system creates uncertainty about benefits, while increasing life expectancy means that more and more people may face a considerable drop in living standards in their last years.

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