The Way Out For the EU.docVIP

The Way Out For the EU 　　The EU economy is in trouble， with new uncertainties brought by Britain’s exit， Italy’s upcoming referendum， and growing risks in banking. 　　EU policymakers are vexed by the current plight， but they have yet to come up with an effective solution. To extricate the EU from its economic mire， the bloc’s leaders must not only choose correct policies， but also take bold steps to solve deeply rooted systemic problems. 　　Comprehensive social welfare provision， disproportionate to current levels of economic development， has become a drag on EU economic growth. A broad cross-section of EU society agrees that maintaining the social welfare status quo is difficult but that pushing through even comparatively small reforms of the system is challenging because of vested interests. Yet， high social welfare costs continue to negatively affect economic performance. 　　The first consequence is high unemployment. When laying people off is difficult， employers are less willing to hire in the first place. Such reluctance largely derives from overly protective welfare provisions regarding workers’ rights and complex redundancy procedures. 　　The second outcome is constraints on innovation. In today’s world of globalization， companies must treat their capacity for innovation as critical to their survival. By soaking up a sizeable fraction of business profits， Europe’s social welfare system inhibits development of the region’s capacity to innovate， which in turn undermines its economy. In the Lisbon Agenda issued in 2000， the EU proposed that research and development expenditure should account for 3 percent of GDP. In practice， however， the proportion remains only 2 percent. 　　Welfare reform among continental European states presents such a challenge that it became one of the reasons for Brexit. Britain joined the then European Community in the 1970s， attracted mainly by continental Europe’s economic vitality. Brexit， conversely， can be attributed to the de