The Changing Welfare State in Europe
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The Changing Welfare State in Europe

The Implications for Democracy

Edited by David G. Mayes and Anna Michalski

The welfare state in Europe has been reformed gradually over the past two decades, with the intensification of the economic and monetary union and the addition of fifteen new members to the EU. This book explores the pressures that have been placed on the welfare state through a variety of insightful and thought-provoking contributions.
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Chapter 3: The economic crisis and prospects for European social insurance and democratic governance

Katherine Lyons and Christine Cheyne


In the wake of the sovereign debt crisis, the need for protection against social risks such as unemployment and destitution has increased. The 2007 banking crisis has led to loss of personal and household savings and assets, wage reductions and increased unemployment. New vulnerabilities have been exposed, particularly in high-unemployment economies and economies that espouse a Protestant work ethic and rhetoric of undeserving poor. Particularly adverse are the consequences for the retired and those soon to retire. It has been estimated that the financial crisis reduced the value of assets accumulated to finance retirement by around 20ñ25 per cent on average (AntolÌn and Stewart, 2009) although there has been some recovery since. Effects are sometimes cumulative and hence more concentrated: where workers experience unemployment, pension savings are reduced which in turn has an impact on future retirement income. The ensuing economic realities demonstrate the fragility of the globalized economy, where a US-generated crisis can reverberate around the world. The broadening sovereign debt crisis and associated austerity measures in Portugal, Ireland, Italy, Greece, Spain and Cyprus threaten to launch a new wave of economic hardship on the EU just as its members had started to recover from the initial shock of the economic crisis. Irwin (2010) describes the spreading debt and fiscal crisis as having a ëcontagion effectí. Protection against risk thus seems critical. Lyons and Cheyne (2011) describe how social insurance allows a risk-pooling that enables lower-risk groups in society to contribute to the protection of higher-risk groups.

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