Successful reformers can offer valuable lessons for the rest of the EU
Acloud hangs over continental Europe's future. Its economic and social models, reflecting a penchant for egalitarianism and social solidarity, are increasingly under pressure. Notwithstanding progress on reform, unemployment remains persistently high, and per capita income has been stuck at about three-fourths of the U.S. level since the mid-1970s. More recently, productivity also suffered a protracted slowdown, as countries found it difficult to adapt to ongoing technological change and globalization. The upshot is sluggish growth, with limited prospects for improvement in light of the impending onset of population aging. In the unfolding debate, many point the finger at Europe's welfare states, arguing that high levels of taxes and transfers hurt employment, while underlying rigidities hinder an effective reallocation of resources. Nobody denies that some kind of reform is necessary, but there is no consensus on what to do.
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