Europe tightens its belt but can't avoid a coming storm

There are countless people in the UK who derive their entire income from the country's bloated and largely unproductive public sector. There are households where successive generations have never understood the ethic of self reliance.

Kevin is from a blue-collar background in the UK. He has a house in South London, a car, a "partner" and three children, each of whom, by his own admission, gets £1,000 (Dh5,345) worth of presents at Christmas. Not bad for a young man who has just entered his thirties, one could be justified in thinking. Kevin has clearly "arrived" and is well able to support his family. But to my recollection Kevin has never had a regular job. He stopped the occasional "off the books" shift as a construction labourer in his mid-twenties when he became too obese, though he has no real underlying medical condition. His house is subsidised by the taxpayer. His car is also provided by the taxpayer through a scheme aimed at giving the long-term "infirm" a measure of mobility. The health care he receives - and will receive more of as time goes on, as a result of his obesity - is also underwritten by the taxpayer.

He can afford to give his family a good Christmas on the generous additional benefits he receives as someone who is unemployed, who has what is officially termed a disability, who has children to support and who does not have to worry about monthly payments for his home and vehicle. Kevin loves his family. He is kind, gentle and good humoured. He is not lazy or a waster. It is just that an over-generous system of taxpayer supported benefits has shielded him from circumstances that might force him to enter the job market and provide for himself and those he loves.

There are countless "Kevins" in the UK. There are also countless people who derive their entire income from the country's bloated and largely unproductive public sector. Some of the poorer areas of the UK receive up to 70 per cent of their total local income via subsidy disbursed by the government. There are households where successive generations have never understood the ethic of self reliance. Near uncontrolled immigration has led to the influx of hundreds of thousands of eastern Europeans who have taken the jobs that UK citizens have shunned. In South East England, your table is waited on by a Czech. In Kent, where I lived for a while, young, educated Poles march up the country lanes early in the morning on their way to the fields to pick fruit. The money is sent home, or used to pay for continuing education.

Across the Channel in France, meanwhile, farmers in their tractors drive up the Champs Elysees in protest at the country's - and the European Union's - increasing inability to immunise them and their produce from exposure to open markets. In Spain, thousands go on strike over austerity measures that seek to reinstate the relationship between productivity and reward. In Greece, civil servants man the barricades because the government won't let them retire in their fifties any more.

Europe's sovereign debt crisis has led to dark mutterings about the demise of the euro and the political and social fragmentation of the European Union as its more fiscally fortunate members begin to resent bailing out their profligate neighbours. The situation was marvellously summed up by the tongue-in-cheek note the outgoing chief secretary of the UK treasury left to his successor: "There's no money left," it said simply.

The party is over. The "big state" command economy model has failed. It has spent all the money and billions more. It has left millions without an effective work ethic. And punitive tax rises to pay down sovereign debt will further crush the spirit of the already beleaguered working populations of Europe. I shudder to see the US president Barack Obama busily adopting the centralised, interventionist financial and social policies that have landed Europe in so much trouble.

In the UK especially, years of low inflation and interest rates have led to millions taking on large amounts of personal debt. In Britain, average household debt, including mortgages (on homes worth considerably less than they used to be five years ago) is just shy of £60,000. Average household earnings are less than half of that amount. There is a storm coming. Generations of Europeans are psychologically incapable of understanding the need for personal austerity. Those within the public sector will have to learn about wage restraint. The "Kevins" of this world, having been socially infantilised through unquestioning welfare provision, will now have to consider heading for the fields of nearby Kent for some seasonal fruit picking.

Bashing bankers earned governments a measure of respite from public condemnation during the global financial crisis. But now there is no hiding their own incompetence with the books. Young economies such as that of the UAE should take notice of what is happening in Europe and intensify efforts to reduce the size of the public sector and persuade the population to enter professions that are less reliant on the state purse. This is a necessarily slow and painful process. But as a report from UAE University stated this month, the public sector has become "saturated" and "inefficient". Government employment cannot forever bear the brunt of ensuring prosperity, the researchers concluded.

Government-supported diversification of the economy away from oil into such sectors as aeronautics, smelting, microchip technology, financial services and tourism will help citizens to find more opportunities in the private sector. Diversification can also be championed through creating an economic and regulatory environment that makes it easier for those in the private sector to thrive. Though even here, as my colleague Sultan Al Qassemi pointed out in these pages yesterday, there remains a lot to be done before Emirati entrepreneurs are given a freer, less regulated run.

Europe's travails should serve to intensify efforts by government here to distance itself from, as soon as possible and as far as possible, a direct role in the system of work and rewards that underpins all national economies. The most robust economies are those that are firmly anchored in the grass roots.

Martin Newland is editorial director of The National