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2010: Not an Easy Year for European Union (Zhao Chen)

2010: Not an Easy Year for European Union (Zhao Chen)

Author:Zhao Chen From:Site author Update:2017-08-21 13:43:57

The European Union encountered a rarely-seen eventful year in 2010. The EU members, especially for Germany, France and the United Kingdom, various political groups competed and bargained. Economically, the countries underwent ups and downs with sequence of challenges. No sooner after Greek debt risk alleviated, did Irish debt risk erupt. An unprecedented “risk syndrome” spread all over. Social reforms were on bumpy road with little progress. Not a few member states had to cut welfare to reduce deficit in order to shake off the yoke of financial crisis, but only led to strong social backlash.    

People were changing their mind

The mid-right political wing was the mainstream

In 2010, the mid-right political wing was the mainstream of European politics. France, Germany, Italy and Poland were all ruled by centre-right wings. In EU parliament, the centre-right European People’s Party was the premier party. The UK’s election result of 2010 was a combined cabinet of the centre-right Conservatives and centre-left Liberal Democratic Party, with the dominance of the Conservatives. However, the policy guidelines changed remarkable compared with 2009, even though the centre-right ruled the both years. Due to the international financial crisis in 2009, the European countries adopted the Keynesian stimulus policy in accord with the world and the bail-out proposal in face of potentially touching the bottom of economy. Therefore, even though the ruling party was the centre-right wing, its economic policy was more like the one of centre-left. In 2010, European economy’s slump was alleviated and the drawbacks of governmental bail-out gradually appeared. The financial crisis of Greece and Irish changed into debt risk. Under such a circumstances, many European governments changed their fiscal policy as a conservative one, and drafted the policies of expenses cut and rigid budget. Germany, France, Italy and especially UK, all began to axe budge deficits. In addition, the European certre-right governments adopted some right-wing economic and social policies, such as reducing public employment positions, increasing the retirement age, reducing the housing welfare and reforming the healthcare system.

Recovery was slow

Different countries developed unbalanced

It was the premier task for the EU countries to recover its economy in 2010, but they recovered at a different pace and developed unbalanced. The imbalance of economic development showcased the difference of economic system among EU members. The first one is the difference of fiscal policy. Some countries like Germany adhered to the rule that fiscal deficit and public debt cannot be excessive which was stipulated by EU’s Framework of the Stability and Growth Pact, but some southern European countries didn’t strictly implement the rule. The second is the difference of labour and taxation policy. After the financial crisis, most European countries could not continue the high welfare policy. France, Greece, Irish and some other countries were compelled to adopt the stringent fiscal plan, and came across with the strong public dissatisfaction. It was related to the rigid mechanism of unemployment insurance and retirement insurance that were formed in the labour market for the long time. In taxation, the corporate income tax in France was 33 percent, whereas in Germany, it was 15 percent. The impact on economic recovery differed a great deal. The sovereignty debt risks made the difference reoccur. The northern European countries, represented by Germany could well undergo the risks, mainly because these countries had prepared early and conducted the economic system reform several years before the crisis. During Schroeder administration between 2003 and 2005, Germany passed an important reform measure called “Agenda 2010” to rectify the labour market, cut unemployment subsidies, promote re-employment and not to set the minimum wage standards, and hence it greatly enhanced the flexibility of labour market and improved its economic competency. By November 2010, German employees totaled 40.9 million, not only restored to the level pre-crisis, but also created the highest record for 20 years since German unification.

Social reform

Welfare was axed

Europe has always been characterized as “welfare society”. The high welfare policy of “cradle-to-grave” was not simply an ideal, but it was widely spread in Europe after the World War II. However, the accumulated welfare has become a heavy burden to restrain the economic development. In order to get rid of the crisis and recover economy, the EU countries had to adopt stringent policy to axe high welfare system.

To axe the social welfare was to move “the cake” of the ordinary people. Since this year, protest waves rose one after another from Athens, Paris to London and Rome. But due to the different national conditions, the reform obstruction was different. Generally speaking, countries like Germany witnessed small obstruction. There are three reasons. The first is it carried out several reforms before the crisis. In early 2007, German parliament passed the act of rising the retirement age from 65 to 67, whereas for France, it tabled the issue during the crisis. The second is the reform measures during the crisis were all gradual measures without too much extent. Several years ago, Germany embarked on the reform on unemployment pension, and this year, it utilized the fund more effectively with a clear aim, and therefore, the unemployed were encouraged to accept the job offers recommended to alleviate the social discontent. The third one is that the rapid economic recovery provided a good reform foundation. But the countries like Greece, Irish and Spain were compelled to conduct reform after the crisis was worsened, and the reform measures were by a big margin, affecting the people’s lives to a great deal.

(Liu Huaxin, reporter in Germany; Zhao Chen, Sub-chief of European Politics Department of Chinese Academy of Social Sciences)

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