New ways to recast the European welfare state

Can European countries still afford their welfare states? It is a question that greatly exercises political leaders, but one they are reluctant to confront for fear of alienating their electorates.

The World Today Published 25 September 2015 Updated 11 December 2020 4 minute READ

Professor Iain Begg

Associate Fellow, Europe Programme

The German chancellor Angela Merkel is fond of reminding audiences that the European Union accounts for only seven per cent of the world’s population, a quarter of its GDP, but as much as half of its welfare spending. Her underlying message is the simple one that Europe spends too much on social policies, and thus has no choice but to retrench, even though per capita welfare spending in EU countries is in line with the other mature OECD economies.

New estimates suggest that the European Union share of welfare spending is closer to 40 per cent and that the most striking contrast is with the emerging market economies which spend substantially less per citizen. Yet for the latter – China is a good example – the strong likelihood is that welfare spending will rise as citizens demand to share in the fruits of growth through more and better public services. As this happens, the EU share of the global total is bound to shrink.

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