This paper by Jagadeesh Gokhale, which I blogged about when it first came out last year, argued that the European welfare states were not sustainable. He wrote,
Generally speaking, older members of the European Union -- including Germany, France, Italy, Greece, Portugal and Finland -- have high FIs compared to GDP.
FI = fiscal imbalance. The largest imbalances as a present value of future GDP were in Malta, Greece, Portugal, and Italy. But other European countries are not far behind. Germany, the supposed responsible state, has one of the largest fiscal imbalances.
Fiscal imbalance is a very long-term measure of sustainability. The low fertility rate in Europe is one of the biggest factors making their welfare states unsustainable.
What is striking about Greece relative to other European countries is not the differences but the similarities. It just happened that Greece is the first country where the crisis hit.
Within ten years, it is more likely that the U.S. will have a European-style welfare system than it is that the European welfare systems will still be intact.