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Back to ¿Modelo social sostenible?

Víctor Pou , Professor, IESE, University of Navarra

model sustainable social?

Wed, 25 Aug 2010 10:26:49 +0000 Published in La Vanguardia (Barcelona)

The welfare state is a European invention and Europe is proud of it. It is a general social organization model , according to which the public authorities provide certain services to the inhabitants of a country, such as Education, healthcare, pensions or unemployment benefits. All this, together with the oversized public sector, contrasts with the austere system in the United States, let alone the non-existent system in the People's Republic of China.

Two threats loom over the continuity of Europe's social model system. The first is certain structural deficiencies and the second is the enormous debt of the states due to the increase of expense and the fall in tax revenues due to the economic crisis. Europe's structural shortcomings are threefold: 1) a growth rate average lower than that of its main economic rivals, largely due to differences in productivity, 2) lower levels of employment than in other parts of the world and fewer hours worked, 3) aging of the population.

Demographic trends are particularly alarming in this respect. The European population today represents about 11 percent of the world's population, but by 2050 it will be only 5 percent. To all this can be added a lack of moral impetus on the part of Europeans, which has led them to ask too much of the state and to rely less on their own means.

The sustainability of model depends on its redirection through structural reforms. It is necessary to go deeper into common needs, to set priorities, to see how services will be paid for, to decide which will be public and which private. The European Union's recently approved diary 2020 aims to address the structural shortcomings described above and, at the same time, to safeguard the essentials of model. The proposed reforms will have to be adopted by each of the member states of the European Union.

In the case of Spain, the need for structural reforms, both to address the threats looming over our social model and to deal with the economic crisis, is imperative. Let us look, for example, at pensions and healthcare.

It is well known that the Spanish public pay-as-you-go pension system is unsustainable in the long term deadline, as a result of demographic trends. It offers benefits that, in order to be sustainable over time, would require a population pyramid with a wide base and a narrow top, just the opposite of what demography predicts. The healthcare system, for its part, cannot continue to assume a healthcare consumption much higher than the world's average and an accumulated healthcare deficit that already exceeds 20 percent of budget and could reach 50,000 million euros in ten years. The demographic problem is also there core topic, since 70 percent of prescriptions are concentrated in the 20 percent of the population that is exempt from payment (pensioners).

If we want to guarantee the continuity of our social model , we need to adopt deep structural reforms as a matter of urgency. If Spain does not do so, the EU will end up demanding it, by virtue of the new agreements recently reached at subject on European economic governance.