Internationale Politikanalyse International Policy Analysis International Policy Analysis Klaus Busch World Economic Crisis and the Welfare State Possible solutions to reduce the economic and social imbalances in the world economy, Europe and Germany There are many arguments in favour of the thesis that the world economy will not find it easy to return to the high growth rates of the pre-crisis era, in the wake of the dual crisis. The crisis and the subsequent weaker growth are putting welfare states in both the industrialised and developing countries under pressure. In Europe, cuts in services, as well as tax and contribution increases, are further entrenching the process of recommodification which has characterised the reform of European welfare states for years. The situation in the developing countries is more varied: in low income countries primarily under threat are informal social secu­rity systems and the first attempts at cash transfer systems. In middle income countries, in contrast, better growth prospects mean that the building up and expansion of social security systems can con­tinue. Fundamental reforms at the international, European and national levels could both reduce the economic and social imbalances in the world economy and improve the conditions for growth. Only by means of such far-reaching reforms will the world economy be able to return to more balanced and crisis-resistant growth. FEBRUARY 2010