Is the Eurozone causing poverty?
Matthew Lynn writes at The Telegraph:
Eurostat, the statistical agency of the European Union, has published its latest findings on the numbers of people “at risk of poverty or social exclusion”, comparing 2008 and 2015. Across the 28 members, five countries saw really significant rises compared with the year of the financial crash. In Greece, 35.7pc of people now fall into that category, compared with 28.1pc back in 2008, a rise of 7.6 percentage points. Cyprus was up by 5.6 points, with 28.7pc of people now categorised as poor. Spain was up 4.8 points, Italy up 3.2 points and even Luxembourg, hardly known for being at risk of deprivation, up three points at 18.5pc.
It was not so bleak everywhere. In Poland, the poverty rate went down from 30.5pc to over 23pc. In Romania, Bulgaria, and Latvia, there were large falls compared to the 2008 figures – in Romania for example the percentage was down by seven points to 37pc.
What was the difference between the countries where poverty went up dramatically, and those where it went down? You guessed it. The largest increases were all countries within the single currency. But the decreases were all in countries outside it.
Coincidence? I doubt it.
Across the EU, 8pc of people are defined as “severely materially deprived”, which means that they lack access to what most civilised societies regards as basic necessities – if you tick four out of nine boxes, which include not being able to afford to heat your home, eat meat or fish or a similar protein at least every other day, or pay for a phone, then you fall into that category.
Strikingly, several eurozone countries are now starting to lead on those measures. Greece, inevitably, is rising fast, with 22pc of the population now falling into that category, compared with only 11pc back in 2008. In Italy, a country that was as prosperous as any in the world two decades ago, a shocking 11pc of the population are now “materially deprived” compared with 7.5pc seven years ago. In Spain the rate has doubled, and in Cyprus it is up by more than 50pc.
And yet if you look at countries outside the single currency, that rate is either broadly stable, as it is in the UK for example, or else falling at a respectable rate – in fast-growing Poland, for example, the numbers suffering “material deprivation” has halved in the last seven years, and, at 7.5pc, is now a lot less than it is in Italy.
More deprivation in Italy than Poland!
In fact, it is not very hard to work out what has happened. First, a dysfunctional currency system has choked off economic growth, driving unemployment up to previously unbelievable levels. After countries went bankrupt and had to be bailed out, the EU, along with the ECB and the IMF, imposed austerity packages that slashed welfare systems and cut pensions. It is not surprising poverty is increasing under those conditions.
You can’t have a common currency without a common fiscal policy.