The European Welfare Trap: What 'Growth First' Would Actually Cost
The short answer is that the European public would react badly to any “Growth First” agenda premised on welfare retrenchment — but the more interesting question is which publics, and on what timeline — because Europe is not a monolith, and the political economy of welfare retrenchment plays out very differently depending on where you are standing.
The historical record on this is fairly unambiguous. Every serious attempt to structurally trim European welfare states — Schröder’s Agenda 2010, Sarkozy’s pension reforms, the austerity packages imposed on Greece, Portugal, and Spain after 2010 — generated fierce political backlash, often with lasting consequences. Schröder’s reforms, widely credited by economists as having improved German labor market flexibility, effectively destroyed the SPD’s electoral coalition for a generation. The lesson absorbed by most center-left and center-right parties alike was that the political cost of structural reform is immediate and visible, while the economic benefits are diffuse and delayed. That asymmetry is not going away.
What makes the current moment somewhat different — and slightly more volatile — is that the public’s tolerance for austerity framing has been pre-exhausted by the post-2008 decade. Entire electorates watched their governments impose fiscal discipline at the behest of Brussels and the bond markets, and the lived experience of that era now functions as a political immunization against “Growth First” rhetoric. When a politician today proposes scaling back the welfare state in the name of competitiveness, a substantial portion of the electorate hears not an economic argument but a replay of a grievance they have already processed and rejected. Marine Le Pen, the AfD, and similar movements have been extraordinarily effective at converting that grievance into durable votes precisely because they promise to protect social entitlements while directing blame outward — at migrants, at Brussels, at elites — rather than inward at the structural math the analyst is describing.
There is, however, a generational and geographic wrinkle worth noting. Younger Europeans in high-cost urban centers are increasingly aware that the welfare state they are paying into is largely calibrated to serve the cohort ahead of them. Pension systems that absorb enormous proportions of public spending predominantly benefit older citizens who also have higher rates of homeownership and accumulated assets. There is a nascent but real generational resentment building in several countries — most visibly in France and the Netherlands — where younger voters are not necessarily wedded to the traditional welfare architecture in the way their parents are. A “Growth First” framing that was genuinely honest about this intergenerational redistribution dynamic, rather than packaging itself as generic austerity, might find a more receptive audience than conventional wisdom suggests. The problem is that no serious political movement has yet found a way to make that case without getting immediately captured by the pensioner vote, which turns out in far higher numbers.
The deeper structural problem is that “Growth First” as a policy program has an almost entirely unconvincing track record within European political economy. The supply-side argument — cut regulation, trim welfare, attract investment, grow the tax base — has been the operating premise of the EU’s general orientation for thirty years, and the productivity gap with the United States has widened, not narrowed, over that period. Mario Draghi’s 2024 competitiveness report essentially acknowledged this, arguing that Europe needs something closer to coordinated industrial policy than liberalization. That is a significant concession, and it suggests the political class is beginning to understand that the standard reform prescription is not credible to the public partly because it has not empirically delivered what it promised.
The realistic political outcome, absent a genuine crisis forcing the issue, is continued muddling: modest spending adjustments sold as efficiency gains rather than cuts, continued borrowing at the edges of fiscal rules, and the gradual erosion of service quality rather than any explicit retrenchment. That is less dramatic than a welfare state rollback, but it is also less honest — and it is precisely the kind of slow institutional decay that tends to radicalize electorates over the medium term far more effectively than any single austerity package.
The European public would not accept a clear “Growth First” mandate. But it may, incrementally and without ever being asked directly, find itself living in one.