Changing Welfare States and the Euro Crisis

For the member states of the European Union, where collective coverage of modern social risks is comprehensive, with welfare spending accounting for 16 to 30 per cent of GDP, the global financial crisis marks a serious ‘stress test’. Considerable employment growth across the EU over the past decades has been wiped out overnight while unemployment soared to 23 million people. Joblessness rose from 6.5 per cent in 2008 to over 10 per cent across the EU in 2012 and, most dramatically, to close to 25 per cent in Spain, with Greece trailing behind at 20 per cent. Most worrisome is the surge in youth unemployment. One in five under the age of 25 in the European labour force is out of work, again with Spain leading at a staggering rate of close to one in two youngsters. In other troubled economies, Greece, Portugal, Ireland, and Italy, youth unemployment figures hover above 30 per cent. Meanwhile joblessness has also become increasingly structural. In Italy half of those out of work have been unemployed for more than a year. Youth and long-term unemployment leave deep social scars in terms of falling income and earning capacities, social-psychological distress, lower life expectancy, skill erosion, and strained public finances. In old age pensions, public systems have suffered losses of financing and contributions, due to the effect of the crisis in employment.