Turkish Daily News: Northern Europe dusts off the welfare state

Turkish Daily News (Ankara, Turkey) - Monday, April 23, 2007
The Nordic region, traditionally a bastion of social democracy and the welfare state, is being swept by a wave of market liberalization with four of the five countries now governed by conservatives.

While no one in Denmark , Finland, Iceland or Sweden wants to abolish the welfare state, the four countries are intent on dusting off the model, in place since the postwar period and based on high taxation to fund generous benefits.

The Nordic countries are becoming a little less unique as they turn "more mainstream European," Klas Eklund, chief economist at Swedish bank SEB, told Agence France-Presse.

"This is not a revolution in the French way with people in the street striking, this is a revolution in the Nordic way - many small steps which are gradually moving, changing society," he said.

He said the shift was a reflection of the fact that "the tax ceiling has been reached and it's necessary to increase efficiency. Furthermore, the working class base is gradually eroding as the middle class is growing."

Finland this week became the latest Nordic country to shift to the right, with the appointment of Prime Minister Matti Vanhanen's new center-right government. Norway is now the only country in the region to be governed by the left

Similar programs: Vanhanen has formed a coalition between the Center Party and the conservatives, following in the footsteps of his Swedish conservative counterpart Fredrik Reinfeldt who heads a center-right coalition in power since last October.

The new Finnish government's program even resembles Reinfeldt's, introducing a series of tax cuts and an emphasis on getting Finns back to work.

Sweden has already reformed its unemployment insurance scheme, raising premiums and reducing benefits in order to give people more incentive to work.

Vanhanen has called for tax cuts of almost two billion euros ($2.7 billion) by 2011. Sweden has already announced plans to abolish wealth tax and property tax , on the heels of the previous Social Democratic government's decision to abolish inheritance tax .

But despite these changes, the shift to the right is moderate, according to the director of the Swedish Center for Business and Policy Studies (SNS), Stefan Lundgren.

"In Denmark and Sweden and now in Finland, the conservatives have been very clear: they are not going to make major changes to the welfare state. That's one of the reasons why they managed to get the electorates' support," he said. "They are promising certain reforms but the basic structure remains the same," he added.

Politicians across the board in the Nordics have been marked by the decades of social democracy, coloring their political convictions - even those on the right.

Eklund noted that in Denmark and Sweden, Liberal Prime Minister Anders Fogh Rasmussen and conservative Prime Minister Fredrik Reinfeldt "have taken power partly by moving to the center and stealing Social Democratic rhetoric."

According to Lars Bille, a political scientist at Copenhagen University, Denmark 's Liberal-Conservative government has largely "toed the line of the Social Democrats, adopting many of their policies and the traditional weapons of social democracy." Small steps: Denmark has seen only small changes since Rasmussen came to power in 2001 after immigration problems led to a strong right-wing surge following nine years of Social Democratic rule.

"Voters consider the current prime minister just as good a guarantor of the welfare state, and he even has a better economic record," Bille said.

Eklund agreed that the Nordics' shift to the right is about modernizing the welfare model and rendering it more efficient, a process already undertaken in part in Sweden by the Social Democrats who vastly reduced the public sector in the 1990s.

He maintained that the biggest threat to the welfare state was not from right-wing parties but from other factors such as aging populations and climate change.

"The challenge for the welfare state doesn't come from the domestic policies, but from globalization and the difficulties of raising (already-high) taxes ," he said.

It remains to be seen whether the Nordic conservatives will remain in power long enough to see the real results of their reforms. In Iceland, voters go to the polls on May 12