Increasing inequality plunging millions more Europeans into poverty
Poverty and inequality in Europe have reached shocking levels, according to a new Oxfam report.
Between 2009 and 2013, the number of Europeans living without enough money to heat their homes or cope with unforeseen expenses, known as “severe material deprivation”, rose by 7.5 million to 50 million people. These are among the 123 million people(1) – almost a quarter of the EU’s population – at risk of living in poverty, while the continent is home to 342 billionaires.
‘A Europe for the Many, Not the Few’ report findings confirm and add to research done by the IMF and others on how rising inequality is making the fight against poverty harder to win. As part of its global campaign against inequality, Oxfam works on tackling poverty across Europe.
The Oxfam report, which reveals the extent of inequality across the continent by analyzing data on poverty and wealth, is accompanied by a league table. Both are being published ahead of an informal meeting of European Finance Ministers on 11 and 12 September.
The league table ranks European member states on seven separate measures of inequality and poverty. It shows that while some countries such as Bulgaria and Greece perform particularly poorly across a number of indicators, the majority of European countries face significant problems of economic inequality, among them:
- People in Germany, Greece and Portugal see the highest levels of income inequality before taxes and transfers, such as welfare benefits, are accounted for.
- Inequality in disposable income is greatest in Bulgaria, Latvia and Lithuania. However a number of countries, such as France and Denmark, also saw a rise in disposable income inequality between 2005 and 2013.
- Rates of poverty among employed people are highest in Romania and Greece, but are rising elsewhere in Europe too, including in Germany and Slovenia.
- Women in Germany, Austria and the Czech Republic experience some of the widest gender pay gaps in Europe.
- The difference between the pay of workers and top executives is greatest in countries such as Latvia.
The league table also shows how government policies can drive inequality up or down. For example, Sweden’s tax and benefit system is the most progressive in Europe, helping to reduce income inequality there by 53 per cent. In comparison Spain’s tax and benefit system only managed to reduce income inequality by 32 per cent.
Oxfam’s report warns that the excessive influence of wealthy individuals, corporations and interest groups on policy-making at a national and European level is exacerbating poverty and inequality across the continent. For instance, representatives of private and commercial interests make up 82 per cent of the groups responsible for advising the European commission on tax reform.
Natalia Alonso, Deputy Director of Advocacy & Campaigns for Oxfam in Europe said:
“We live on a rich continent where poverty and inequality are on the rise and are the product of political choices, not fate. To tackle inequality and poverty in Europe, we must reduce the influence the rich and powerful have in shaping government policies in their favor at the expense of the majority of European people. Greater public transparency on policy-making would be an important start.”
The report highlights austerity alongside unfair and regressive tax systems as being the two key drivers of inequality in Europe.
Austerity measures introduced after the financial crisis in 2007/8 include cuts in public spending, the privatization of services, and deregulation of labor markets. All these measures have hit the poorest hardest. Since 2008 in Ireland, for instance, decreasing incomes and significant unemployment have forced almost a quarter of a million people out of expensive private health insurance schemes. At the same time, Ireland has cut its health care budget by 12 per cent.
Unfair and regressive tax systems allow multinational corporations to evade billions of euros in taxes, heaping the tax burden on individual citizens. In Spain, 90 per cent of tax revenue comes from individuals through labor, income and consumption taxes, while corporate taxes account for just 2 per cent of the total tax revenue.
“Governments need to rebalance our unfair tax systems so that companies pay their fair share of taxes. Governments must also rethink austerity and reinvest in public services and guarantee decent wages, so that the poorest in our societies do not continue to pay the price of the financial crisis,” Alonso said
- The report ‘A Europe for the Many, Not the Few’ is available here
- The Inequality League Table is available here
- (1) Eurostat reference – 123 milion people at risk of living in poverty