"Europe Must Rewrite Social Contract As Price Of $1 Trillion Lifeline" - WaPo

Yep, there it is, the subheadline under "A new reality for the old world" for an upper left-hand corner, front page story by Howard Schneider on the front page of today's Washington Post. Wow. Except that this is one of the most distorted and off-the-wall headlines to appear in such a place in a long time, with the obvious agenda of wanting to say the same for the US (time for that deficit commission to cut social security anyone?).

What is true is that for a country (e.g only Greece so far) to borrow from the newly established fund, put up by EU countries and the IMF and backed by the ECB, with a further backing by the US Fed, which has reopened its closed-down currency swap lines, it must engage in serious budget deficit reduction. Quite likely that will involve both spending cuts and tax increases, as have been voted for now by the Greek parliament, despite the riots in the streets by opponents of this.

However, let us be clear. First of all, this is not at all a statement or policy about "Europe" as a whole at all, much less social contracts in general. As of 2006 Greece had a lower percentage of GDP going to social spending (24.2%) than the EU average (26.9%). Countries with the highest percentages include some that have much less severe budget deficit problems, e.g. Germany, Sweden, France, Austria, the Netherlands. This is a problem of tax collections and corruption and underground economies, not of an out-of-control "social contract."