The P bomb One of the reasons of
the Euro weakness is the unbearable social security charge of the member
States: it concerns a sort of original sin in detrimental of our future The so
many physicians busy by now at the sick-bed of the Euro, searching the
reasons of its weakness, must pay more attention to the P bomb: where P stays
for pensions, and its deflagration is expected around 2020. To understand the
link between the two problems, it must start-off from the eleven countries of
the Economic and Monetary Union demographic projections that the World Bank
has put in the spotlight in a six-years-ago report. Those countries show at
the same time, birth rates among the lowest all over the world and a very
high average life expectation, very close to eighty years for women. This
combination gives as a result the progressive population ageing, and so a
change in the ratio between active citizens (who pay contributions) and those
in retirement (that benefit from). Reliable calculations carried out by the
Eurostat state that in 2025 the Community Europe will count in 113 million
retired that is near the third population. With an outlook alike, it I not
hard to understand why the most far-seeing investors are sceptic about the
future of the European currency. To keep one's engagements the Economic and
Monetary Union will be compelled to practice a very high fiscal drag, at an
extent to reduce not only the individual's purchase capability but also to
choke back development and condemn the corresponding economies to asphyxia.
The origins of the problem are to be searched in the fifties, sixties and
seventies, when the young European governments, ever searching popular
consent, and unable to contain the trust unions' pressure, started-off social
security systems at the same time too generous and lacking automatic
mechanisms of correction. The Italy of the bonanza was, under many aspects,
at the lead of this trend. It would have been enough a little common sense to
realize that allowing civil servants the possibility to retire only after
twenty years of work (fifteen for women), would have meant to expose the
State to the risk to pay them pensions for other thirty or forty years,
charging this way the Exchequer with unbearable expenditures. It would have
be enough the less foresight to understand that, provided that the average
life lengthened ten-year by ten-year, the concept itself of retirement
pension would have become a time-bomb. It would have been enough a little
honesty to give up, but in cases exceptional at all, to the early-retirements
system that not only has expelled from the official producing system and
introduced in the unofficial work circuit hundred thousands individuals still
perfectly able to work, but also has discharged on the social security system
expenditures that were not its concern, and so on. Instead the first serious
corrective measures, in fact, date back to 1992, when the first Amato's
government must face the emergency of the great devaluation of the lira. The
second attempt to put order in the social security system was undertook by
the Berlusconi's government in the fall of 1994, but was blocked by trade
unions that made a million people come into streets to prevent that the new
law, that would have solved the problem once and for all, were introduced in
the financial act. The follow reformation act by Dini, that is by a technical
government lacking popular legitimisation and so without a majority in
parliament, averted the danger of a crisis for some years but without taking
the bull by the horns. Novelties were thinned out in time, and the
repartition system was replaced by the accumulation one so much by degrees,
to turn the novelty incisive only from the next ten-year. The paradox is that
both Romano Prodi and Massimo D'Alema were perfectly aware that the public
accounts balancing would not ever be complete till the retirement system
won't fit the new demographic situation. The latter, who during the two years
and half spent at Palazzo Chigi did not dare to take any initiative, became,
in his new charge as President of the European Committee, a sort of Cassandra
putting in guard at any chance against the dangers of the inmobilism. The
last has been always frightened by the veto of his majority. Now, anyhow,
2001 is next and the international institutions, from the European committee
to the Monetary Fund, don't lack the chance to remind us that if we want to
keep our engagements and keep being competitive, we must start on social
security system again. Unfortunately, the expiring coincides with the
political elections and the new Amato's government, raised to recover
consents to a Centre-Left in troubles and depending, for its surviving, on
the votes of the Italian Communists and the CGIL, has already announced that
it does not intend to affect pensions. For his American experience, Amato has
become the great supporter of the private integrative pension funds, the
trade unions' hostility in order to not lose the control of this huge amount
of money has prevented till now the quickly going on this way. Germany that
invented the so called “Rhenish model”, other way said “market social
economy”, and has always gone on by the widest arrangement with trade unions,
not only has a social security system much more generous than ours, but is
also compelled to extend it (in part) to the 17 million Germans coming from
east. The fiscal drag the retirement expenditure works out on the resources
of the federal republic is deemed already as the main responsible factor for
the slowing of the economy, and risk to become a hindrance for the entire EU.
The same Germans, that at the beginning were hostile to the Euro because they
feared that the weakness of the other currencies would have sucked them
downwards, admit today that they are the concomitant cause of the sole
currency crisis. Notwithstanding the chancellor Schroeder, dealing with
consent troubles alike those of the Italian Centre-Left, has postponed all to
the 2002 that, unfortunately is the year of elections. The suspicion is that-
being uncertain about the possibility to be re-elected - he meditates to
leave the hot potato to his successor. The same delicate is the situation in
France where the premier Jospin declared early “the repartition system is the
symbol of the solidarity chain linking a generation to another, one of the
fixed points of the national social pact. Many bear that, as regard to the
negative demographic evolution, it must be replaced by the Anglo-Saxon-model
pension funds: well then, I say that this is not our approach”. Provided
that, it's very unlikely that Jospin, who points to the Republic's
presidency, will take any initiative that can alienate him the communist and
socialist electoral base. Jospin remembers far well the troubles of his
predecessor the Gaullist Alain Juppé, just started when, in 1995, tried to
reform the social security system, and after two years of disorders, ended
with a devastating humiliation at polls. Anytime the word “reformation” is
pronounced by trade unions, both the private and public sectors rise up in
arms; and Jospin's only answer is proposing consultations with everybody and
the establishment of special committee allowing him taking time.The matter is
more or less the same in Scandinavia, where the dominium of the social
democrats that have endured a very long time produced a very expensive and
elaborated welfare state, and in Benelux and Austria, where they followed the
German model. The sole real exception is Great Britain, where pension on
State's charge are very contained and it prevails since time the
capitalization privatistic system: indeed London is out of the Economic and
Monetary Union and the sterling, moving in convoy with dollar, has gained its
time a good 15% over Euro. However remedies are available, but it requires
good political will (and the needed majority) to enforce them, for example it
would be enough to rise by three years the average age at which the Europeans
can retire- today 61 years old for men and 58 for women- to ford the
troubles. Alternatively it could be adopted for everybody and in brief times,
the capitalization system, changing this way the pension computation system,
cutting the reversionary annuities whereas there were other resources, and
eliminate by degrees the special treatments. All of them are painful
measures, affecting interests that are both spread and consolidated and that
no government, neither Right nor Left, can take without risking seriously:
the “attacks” to pensions, not only current but also next, are experienced by
citizens as a form of expropriation. But the too generous social security
Europeans wanted to give themselves as a balancing for the troubles they
suffered in the Second World War, is turning into a kind of original sin from
which we must get free someway: on pain of a hindrance for next generations.
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