Harper's misreading of the European debt crisis

February 7, 2012 - Prime Minister Harper assumes a strong causal relationship between (too high) welfare state standards and the sovereign debt crisis of Eurozone economies, and thus pleads for even stricter austerity programs in Europe and for precautionary reductions of entitlements in Canada. This approach has a few merits but also very strong limitations, and more so, there are limits to apply the basic ideas to the complexities of the Eurozone crisis.

Dr. Kurt Huebner says that empirical findings as well as theoretical considerations do not support the causal ties between the level of welfare state spending and the Eurozone crisis: 

 "The financial crisis started 2008 and it is an established empirical fact that, in general, the sovereign debt default crises are a consequence of private indebtedness. If too high entitlements, in other words, high welfare state standards have caused the sovereign debt default crises, we would expect that societies with the highest and most generous welfare states would be top-ranked in the group of sovereign debt default economies. According to general prejudice this would be Sweden, Denmark, Norway, Finland and Germany, Austria and the Netherlands. But those economies are ranked in the top of the group of economic high-achievers. In other words: making a causal link between sovereign debt crises and welfare state entitlements is not confirmed by empirical data."

Dr. Kurt Huebner is Jean Monnet Chair at the University of British Columbia. For his more in-depth analysis see his last policy memo: http://www.ies.ubc.ca/political-exploitation-crisis-eurozone.  He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

Dr. Amy Verdun, Jean Monnet Chair Ad Personam, and Professor and Chair of the Political Science at the University of Victoria, is expert on the European Crisis and is also available to shed light on how financial matters affect policies aimed at those who most need support, and what governments in Europe are doing to support people in these difficult times. "With dwindling financial sources Europe faces difficult choices. Is Europe still able to keep the high social protection that was available in previous decades, or will things have to change?". Dr. Verdun can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..