Austerity measures destroying EU social model: report

“The achievements of the European social model, which dramatically reduced poverty and promoted prosperity in the period following the Second World War, have been eroded by short-term adjustment reforms,” notes the report.

The report argues that fiscal consolidation meant to reduce debt has failed to stimulate the kind of economic growth needed to create jobs.

It notes that maintaining social protection not only reduces poverty but also stimulates growth by boosting the health of the vulnerable, increasing their productivity, and by extension props up domestic demand.

The report says that families in austerity-driven nations like Ireland, Cyprus, Greece, and Portugal have seen their disposable incomes plummet, leading to lower consumption.

In Greece, salaries dropped 35 percent since 2008 while unemployment increased by 28 percent. At the same time, social security reforms are being replaced with a system that limits the responsibility of the Greek state.

For comparison, the ILO estimates poverty rates in Finland in 2010 would have been over 30 percent, as opposed to around 7 percent, had the government slashed social protection transfers to those in need.

The ILO notes some structural reforms imposed on governments are designed to streamline administration.

But the emphasis, it says, has been disproportionally placed on the fiscal objective of balancing public budgets “without due consideration to the objective of adequate benefits to all people”.

Europe’s solution to the crisis for the past five years has instead given rise to persistent unemployment, lower wages and higher taxes.

All three have boosted poverty and social exclusion rates, which now affects some 123 million people or 24 percent of the EU population.

Before the start of the crisis in 2008, the figure was 116 million. Today, around 800,000 more children now live in poverty compared to five years ago.

“Some estimates foresee an additional 15-25 million people facing the prospect of living in poverty by 2025 if fiscal consolidation continues,” warns the ILO.

The European Commission, for its part, notes unemployment has increased to close to 26 million.

It says 5.3 million young people are jobless and around half of the unemployed have been without a job for more than a year.

“Although there are some signs of economic recovery, it remains slow; it is still very fragile; and it is uneven throughout the EU,” EU employment commissioner Laszlo Andor said Monday.

Andor says nearly a quarter of the population is still considered at risk of poverty or social exclusion.