Radical overhaul

The package of tax and welfare reforms pushed through by the German government is a milestone for the country and a road map for similar changes in the rest of Europe. Following reforms in the health sector, decided on July 21 and which are expected to trim Germany’s state budget by 10 billion euros over the next year (moving the burden onto the shoulders of the insured), the German government has decided to make tax cuts of up to 15.6 billion euros starting in 2004 instead of in 2005, as originally planned. This measure, which is aimed at boosting entrepreneurial activity, is coupled with the abolition of subsidies for house purchases as well as the termination or reduction in tax exemptions on transport costs for commuters. From a political and social perspective, however, the most crucial aspect of the reforms promoted by Chancellor Gerhard Schroeder are the plans to unite the unemployment and welfare funds with the aim of discouraging parasites on the dole who live off social security payoffs. Under the new measures, unemployed Germans will continue to receive their entire wage for an initial period, but once that ends they will no longer get 53 percent of their wage but a much smaller benefit which has been set at a maximum of 331 euros for Eastern Germany and 345 euros for the western part of the country. Given that the cost of renting an average flat in Germany is often more than 1,000 euros, the reforms will make it harder for an unemployed person to snub available jobs. Moreover, for every job turned down, the basic benefit will be trimmed by 100 euros for the next quarter. The final adjustments are of little importance but the political message, to which we must also pay heed, is crystal clear. Europe’s economic situation is so dire that we must learn to live without lavish state handouts. Specifically, Greece, under PASOK’s 20-year rule, during which we saw our living standards rise without any special effort on our own part, must realize that the fat years, marked by the massive inflow of EU money, are history. The German chancellor, French President Jacques Chirac and other European leaders are not shrinking the welfare state out of resentment for their people; they do so because their economies can no longer bear the strain. And when Germany or France can not afford this, it is naive to believe that Greece is up to the challenge.