By SAMUEL GREGG [MercatorNet] – Only a short while ago some European politicians were touting the European social model’s superiority over what many continental Europeans deride as “Anglo-Saxon capitalism.” Now, however, governments across Europe are scrambling to avoid the fate of Greece. Moreover, they are doing so by contemplating—and, in some cases, implementing—the hitherto unthinkable: reducing their budget deficits by diminishing the expansive welfare states to which many Europeans have long been accustomed.

In doing so, these governments are finally acknowledging a truth initially obscured by the crisis of the euro: that for all the disarray generated by the euro’s recent tribulations, Europe’s economic woes have more systematic causes.

One cause is several decades of low economic growth. As the Czech president Václav Klaus recently observed, “average annual economic growth in the eurozone countries was 3.4 percent in the 1970s, 2.4 percent in the 1980s, 2.2 percent in the 1990s and only 1.1 percent from 2001 to 2009.” “A similar slowdown,” Klaus added, “has not occurred anywhere else in the world.”

A second problem is Europe’s profound demographic decline. On current projections, for example, Spain’s over-65 population is set to increase from its present level of 17 percent to 25 percent by 2030. That means fewer people working to support growing numbers of pensioners.

When low economic growth and declining demography are combined with European welfare states—generous state-provided health and unemployment insurance; early retirement and liberal state pensions; large public sector employment; legislation that emphasizes job security over labor market flexibility—something eventually has to give.

Continued at MercatorNet | More Chronicle & Notices.