Trimming the Fat From Europe’s Welfare States

  1. Government Spending

    Government Spending

    The Germans dubbed it the wohlfartsstaat, or welfare state: a package of social protections enacted in the 1880s under Chancellor Otto von Bismarck. The concept spread from Germany across Western Europe, expanding from basic pension and health-care programs to include such extras as Christmas bonuses and cash payments to new mothers. Now, though, governments across the Continent are scaling back their largesse as they grapple with ballooning budget deficits and heavy debt burdens that threaten their access to global credit markets. Here are some of the measures now being taken:
  2. Ireland


    Irish civil servants are no longer getting “bank time,” a 30-minute weekly paid break that dated to an era when most workers went to the bank to cash their paychecks. Ireland has enacted a 10% reduction in pay scales for government employees that will apply to all newly hired workers. Ireland last year was forced into a $100 billion bailout deal with the European Union and International Monetary Fund after a banking crisis cut off its access to private credit markets.
  3. Italy


    Arrivederci, Maserati. Under a new budget law, only Italy’s President and four other national leaders will get high-performance cars courtesy of the state. The country has a fleet of 86,000 official cars, including an undisclosed number of Maseratis and other high-performance models. The government says it spends $3.6 billion annually on cars used by government officials, and another $1.7 billion on police escorts for official motorcades. Italy’s public debt totals 119 percent of its economic output, the second-highest rate in the euro zone after Greece.
  4. Greece


    Greek public employees may have to skip that island holiday, after a 30 percent reduction in vacation bonuses that in the glory days equaled two months’ pay. Going out to the local taverna will cost more, too: In September, Greece is set to raise the value-added tax on restaurants and bars from 13 to 23 percent. Burdened with public debts exceeding 142 percent of its economy, Greece in the past year has been bailed out twice by the EU and IMF.
  5. The Netherlands

    The Netherlands

    Artists, actors, and musicians are bracing for a 22 percent drop in state arts subsidies. Dutch taxpayers spent $1.3 billion on state arts subsidies last year. That’s about eight times the annual budget of the U.S. National Endowment for the Arts. The planned cuts have sparked protest rallies in several Dutch cities, and arts supporters ran an advertisement in The New York Times saying, “Do not enter the Netherlands, cultural meltdown in progress.”
  6. Portugal


    All Portuguese workers get an annual Christmas bonus equaling one month’s pay. Now, though, a tax surcharge will recover half of any amount above the minimum wage, yielding an estimated $1.1 billion. Portugal also has cut public-sector wages by 5 percent and hiked the national sales tax by 2 percent. The country got a $116 billion bailout package in May from the EU and IMF.
  7. Spain


    A taxpayer-financed $3,600 bonus to new mothers for each child born, known as the cheque bébé, was discontinued on Jan. 1 of this year. The bonus had been introduced in 2007 in an effort to spur Spain’s birth rate, which at the time was just under 10 births per 1,000 people, slightly below the average for the European Union – which in turn has one of the lowest birth rates in the world. By 2010, the rate in Spain had inched up to 10.9 percent