‘Inequalities in Europe to curb growth’
THE ECONOMIC crisis exacerbated inequalities in some European countries and the effects could be felt for decades as cuts in education spending affecting a whole generation might hamper long-term growth, an Organisation for Economic Co-operation and Development (OECD) expert said.
Although the financial crisis of 2007/08 initially hit rich households more severely in most European countries, with welfare programmes cushioning the poorest, austerity pro- grammes imposed from 2010 caused disparities to widen.
“You can talk about two different periods since the crisis started: when the welfare state worked, and then austerity,” Michael Forster at the OECD in Paris, said.
“It could be that we are now in a third phase, which is actually very country-specific,” he said, pointing to a return to more redistributive measures since 2012 in countries like France, while others such as Britain continue to slash spending.
Southern European countries like Greece, Italy and Spain, which were forced to imple- ment stringent austerity after coming under pressure from bond markets in 2010/11, saw income inequalities increase sharply between 2007 and 2012.
In Spain, real incomes of the poorest 10 percent dropped by almost 13 percent per year between 2007 and 2011, compared with only 1.5 percent for the richest 10 percent.
By contrast, income inequalities as measured by the Gini coefficient, the most commonly used measure of inequality, actually decreased in Germany and the Netherlands until 2012, the last year for which comparable figures are available.
And the impact of the crisis on inequality could be felt for years to come, Forster said, noting that a quarter of countries surveyed by the OECD planned to cut education spending in coming years. Lower spending on education tends to hurt poor households more than richer ones.
An OECD study this year showed that an increase in inequality of around 6 Gini points has no impact on the richest, but lowers the probability of poorer people graduating from university by around 4 points, reducing economic potential. – Reuters