The Hindu Business Line : Economic, demographic challenges for EU

ON TUESDAY, the European Union (EU) unveiled an ambitious and unprecedented plan to spend $14,500 million (11.3 billion euros) during 2007-13 on training and rehabilitating displaced workers in the region where companies are restructuring their management and production bases.

With over 11 per cent of the European workforce `laid off' or unemployed and living on social security and hand-outs, European governments are experiencing a financial crunch. There is more news these days of companies "laying off" workers. Rarely does one hear about companies recruiting.

This is happening because of major European companies cutting cost and restructuring their finances to protect their competitive edge in the global market. American and Japanese companies, unlike their European counterparts, are not handicapped by the high cost of non-wage social security.

A chunk of the European budget will be spent on research and development and to arrive at "innovative" techniques across the EU countries. The European Commission also hopes to tighten border controls to check infiltration of "economic migrants and asylum seekers" from the developing countries. As much as $8 million has been earmarked for this purpose.

The strategy is to allow the displaced workers "adjust" to the new environment and as Mr Vladimir Spider, the European Commissioner for Employment, put it: "We want to support regions suffering from globalisation."

Research and funding development will take up 6.5 per cent of the EU's budget of over $120 billion. A vast chunk of the rest is spent on "agriculture subsidies" which enables the EU sell its agricultural products at artificially low prices, much to the disadvantage of developing countries.

The strategy to boost industrial research and re-train laid-off workers is to create employment and boost economic growth in the EU, which may average less than 2 per cent this year. This is in contrast to the US and Japan where the economic growth is likely to exceed 3 per cent. The EU officials stated that new funding would be used in "innovative ways" to structure a closer liaison between universities, researchers and industries.

The European officials are also worried by the social, economic and fiscal consequences of the so-called "demographic revolution'' characterised by historically low birth rates and people living longer.

According to projections, some European countries may have more pensioners than tax-payers by 2020. Compounding the demographic crisis of a fast ageing population, many young Europeans are migrating to seemingly greener pastures in North America and Australia.

According to media reports, many Europeans are now contemplating emigration, a trend that has hit a high since the 1950s, in the Netherlands, Germany, Italy and even France, among the "white middle-class" families.

The spectre of racial prejudice against foreigners, particularly Muslims (since 9/11) and economic migrants from developing countries, now dominates political agenda in key European countries.

For example, debates in the run-up to the general election in the United Kingdom are likely to be dominated by racial issues related to the deteriorating law and order situation. Also, in the background will be media speculation on terrorist attacks masterminded by Islamic fundamentalists at home and abroad.

With flight of the "white middle-class", the total German population has shrunk for the first time since the Second World War, according to a European observer.

On March 17, the European Commission spelt out the extent of the decline in EU's population and its ageing workforce, and called for "swift reforms" to address the "unprecedented" demographic change. The working population is expected to fall by 21 million by 2030. In contrast, the population of the US is likely to rise till 2050.

According to Mr Spindle, European Commission's Employment Commissioner, Europeans are disinclined to have more children due to inadequate housing, the high rate of divorce rate and, above all, job insecurity.

Most analysts also agree that the EU countries need more immigrants, but there is no consensus on a policy on immigrants.

The debate now is how and from where to bring the "right" immigrants. The Europeans are also determined to maintain their competitive edge against the US and the rising economic powers of Asia, even as they are grappling with mixed and confused perceptions about a pragmatic strategy.

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