Too bad the Democrats lost. They could have given us this:
IBD Lead Editorial Today:
Monday, January 24, 2005
EU's Gray Future
Global Growth: A new report from the CIA warns that the European Union could be on the verge of breaking up — a victim of its own economic mismanagement. Is anybody listening? Someone should.
Granted, the CIA's record when it comes to predictions is less than stellar. Still, the report contains enough serious criticism of the euro zone's faltering economy to be sobering — and not just for the EU.
The main culprit: a European welfare state that promises jobless benefits so lavish that many healthy, well-educated people simply choose not to work. This is compounded by a fast-graying population and plunging fertility.
In 45 years, the population of Western Europe will actually be shrinking. But long before then, the region will no longer have enough workers to take care of postwar baby boomers reaching retirement age. Without major reforms, taxes will soar.
"The current EU welfare state is unsustainable," the CIA says, "and the lack of any economic revitalization could lead to the splintering or, at worst, disintegration of the EU, undermining its ambitions to play a heavyweight international role."
The CIA's warning was underscored by another report, this one from the U.S.-based Conference Board, that deals a serious blow to Europe's hopes of catching up with U.S. productivity by 2010.
At current rates of productivity growth (see chart), it'll take the U.S. 25 years to double its per capita GDP of $38,324, the data show. In the EU, where per-capita GDP stands at $27,546, it'll take 55 years. In other words, the wealth gap is widening — and fast.
To catch up, the EU must do two things: boost its workforce and increase productivity. Neither will be easy in an economy as heavily taxed and over-regulated as the EU's.
Here again the CIA: "Either European countries adapt their work forces, reform their social welfare, education and tax systems, and accommodate growing immigrant populations (chiefly from Muslim countries), or they face a period of economic stasis."
If this sounds familiar, it's because the U.S. is heading down the same road — albeit at a slower rate. Our population is also aging, and our public pension and health care systems are also broken. Unless reforms are made, we too face higher taxes.
By the CIA's grim reckoning, the EU could fall apart in 15 years if it doesn't act now. Things aren't so bad here. But if we continue to ignore exploding liabilities under Social Security and Medicare, we could be the ones who'll be playing catch-up. |
