Opinion of the European Economic and Social Committee on ‘Lessons learned for avoiding the severity of austerity policies in the EU’ (own-initiative opinion)
Date: 2018-02-14
Institutions: European Economic and Social Committee
Subjects: Economic and Monetary Union, Greece, Ireland, Portugal, anti-crisis plan, austerity policy, budget deficit, economic recession, euro area, monetary crisis








C_2018227EN.01000101.xml










28.6.2018   


EN


Official Journal of the European Union


C 227/1





Opinion of the European Economic and Social Committee on ‘Lessons learned for avoiding the severity of austerity policies in the EU’
(own-initiative opinion)
(2018/C 227/01)






Rapporteur:



José LEIRIÃO











Plenary assembly decision


21.1.2016




Legal basis


Rule 29(2) of the Rules of Procedure




 


Own-initiative opinion




Section responsible


Economic and Monetary Union and Economic and Social Cohesion




Adopted in section


29.1.2018




Adopted at plenary


14.2.2018




Plenary session No


532




Outcome of vote
(for/against/abstentions)


177/26/18






Introduction


The content of the opinion has included input from representatives of civil society organisations and the social partners belonging to the economic and social councils of the three Member States concerned (Greece, Ireland and Portugal) during a series of EESC missions to those countries. The purpose was to gain an understanding of, and take note of, the views of people who are witnessing and experiencing the adverse impact on the social dimension, the business sector and social and civil society dialogue of the austerity policies imposed by the Troika.
1.   Conclusions and recommendations









1.1.


The first lesson from the crisis was that the euro area was not equipped to deal with the financial crisis. The EESC therefore welcomes the Commission’s aim to reform the euro in key aspects by abandoning austerity policies and deepening the Economic and Monetary Union. The EESC considers these to be the prerequisites for a grand European coalition to continue the task of reconstructing a ‘common European destiny’ and regaining the trust of all Europeans.












1.2.


The way in which the adjustment programmes were designed led to a number of inconsistencies at different levels, including: coordination and liaison between the three Troika partners (the International Monetary Fund (IMF), the European Commission and the European Central Bank (ECB)) in the planning, scale and anticipation of potential risks arising from the crisis; lessons learned from previous crises that were not always taken into account or were not applicable in the new single currency area; and a certain imbalance between the IMF’s mechanisms and the macroeconomic policy instruments of the euro area. The EESC, while noting the expertise of the IMF, recommends that in future crisis situations affecting any EU Member States, the European Union institutions should be solely responsible for developing and implementing the adjustment programmes. If it is necessary to establish partnerships with external institutions to tackle the crisis, the European Union and the euro area must take the leadership and should act in line with ‘European values’, strengthening the current social dialogue and civil and social rights in the EU. Future crises must be managed in a way that strikes a better balance between fiscal and social objectives and efforts to bring about qualitative improvements in the business sector.












1.3.


The crisis and the adjustment programmes applied in the three Member States led to an economic, financial and social situation which in some instances set the countries back by 20 years, causing permanent damage — or damage that can only be rectified in the very long term — to their productive factors and to the functioning of the labour market. The EESC urges the Commission to design ‘supplementary economic and social recovery’ programmes, to be applied at the same time as or at the end of an adjustment programme, so as to ensure a swift return to the most competitive level for bringing about convergence.












1.4.


The Commission should refocus on European values of solidarity and take immediate, extraordinary steps to help the most disadvantaged people living in extreme poverty and lacking adequate food, accommodation, healthcare and assistance in purchasing medicines. The EESC recommends setting up a targeted programme for social recovery to operate in the countries that are, or have been, subject to adjustment programmes. This support programme should follow the principles of the European Pillar of Social Rights recently adopted by the European Union and introduced in the three Member States in question.












1.5.


The implementation of austerity policies led to a dramatic increase in the number of people in poverty (whether workers, the unemployed or people classified as inactive or homeless). The EESC calls on the Commission to draw up a ‘European strategy for eradicating poverty in the EU and integrating the homeless’ as a matter of urgency, with the requisite funding not only for building suitable reception facilities but also for running specific training programmes to provide people with job-related skills that match opportunities in both the public sector (municipalities) and the private one. It is also crucial to draw up a plan together with the Member States to come to the assistance of over-indebted companies and individuals, in view of their inability to repay their loans, saving them from insolvency and having their homes confiscated.












1.6.


In the euro area, the rules of the Stability and Growth Pact, the Excessive Deficit Procedure and the Fiscal Compact, and the austerity policies they have engendered, are seriously penalising countries that are still suffering the effects of the crisis by preventing the growth of public investment and support for the creation of private sector jobs, since they would be subject to severe sanctions and penalties in the event of failure to comply with the rules. This state of affairs has accentuated inequality in Europe, with the poor countries becoming even poorer, trapped in a ‘vicious cycle’ due to these constraints. The EESC recommends reforming the Lisbon Treaty by asserting the primacy of economic cooperation and growth policies and of solidarity as the real alternatives to restrictive austerity policies. The EESC also proposes to examine if the ‘golden rule of public investment’ could be an adequate instrument to stimulate public investment in the euro area and secure not only growth, job creation, entrepreneurship and the new skills required for the future of work, but also for ‘inter-generational fairness’, guaranteeing long-term sustainability of public finances together with fair distribution of the tax burden not only among the different generations but also to reflect differences in social and economic conditions, so that one group is not overburdened to the advantage of another.












1.7.


The last two years have seen an improvement in the unemployment rates in the EU in general, particularly in the Member States subject to adjustment programmes. It is important to point out in this instance that this can be attributed not only to economic growth, but also to the hundreds of thousands of workers who emigrated and to the rapid increase in the imposition of part-time work. However, the incidence of poverty and material deprivation at the different levels continue to increase on account of the lower salaries and the precarious nature of new jobs. Thus although more jobs have been created in activities connected with tourism and in other related low skill areas, this has not led to an increase in either competitiveness or added value. The EESC recommends making specific funds available to channel more resources into creating jobs in the health services and the sectors most affected by emigration (science, programming, new technologies, engineering and medicine) to encourage those who have left to return to their countries of origin.












1.8.


Digitisation, automation and artificial intelligence (AI) are radically changing the economy, labour market (including new forms of work), skills and society, posing a challenge to its structures (including the automatic stabilisers) and consequently adding unforeseeable numbers of people to those who are already excluded. The EESC recommends further examining current ideas to set up a ‘universal, basic European unemployment insurance’ scheme. Moreover, the possibility should also be examined of setting EU-wide minimum standards for national unemployment schemes to respond effectively to the challenge and guarantee decent social protection available to everyone throughout their working lives (15-65 years). Regarding the issue of poverty eradication, the Commission should also introduce a ‘minimum living income’, adopting a European approach and commitment to ensure that there is ‘no-one left behind’.












1.9.


Future adjustment programmes should reflect all the issues and interests that emerge from social and civil society dialogue, with the involvement of civil society organisations. The EESC calls on the Commission to create ‘econometric models with a human face’ that include parameters to protect the social dimension and support businesses, thereby meeting a dual objective: social well-being and a sustained renewal of quality in the business sector. The social partners and representatives of civil society must be included in the programme’s monitoring and assessment panel, on an equal footing with representatives of the EU, the ECB and other bodies, so as to draw on the constructive role of civil society and prevent the economic and social model being undermined, as occurred in the cases under analysis. All the institutions that draw up, monitor and evaluate the adjustment programmes must be subject to democratic control (e.g. by national parliaments). Evaluation and control should take place at six-monthly intervals, or another time frame considered adequate, so as to avoid irreparable damage and allow corrections to be made in good time. The set of macroeconomic follow-up indicators should include the ‘Beyond GDP’ social scoreboard, to be updated in line with the European Pillar on Social Rights.












1.10.


Public debt in the three Member States rose astronomically and interest payments act as a constraint, blocking public investment in economic development and reducing investment in social protection, healthcare, education, pensions, unemployment benefit and support to those who are most disadvantaged and marginalised. These Member States, with the exception of Ireland, remain heavily indebted, with the situation exacerbated by speculation on the financial markets. The EESC would recommend that the Commission put this issue at the top of the agenda and follow up on the conclusions of the High Level Group on the mutualisation of debt and euro debt securities, appointed by the Commission in July 2013. The EESC also congratulates the ECB on its quantitative easing programme whereby it acquires Member States’ public debt, which has provided a substantial and decisive contribution to economic recovery and public debt management in the Member States subject to adjustment programmes.












1.11.


As it approaches the end of its 60th year, the European project is facing serious challenges, giving rise to doubts about its future, including the consequences of Brexit. One of the reasons for the divorce between civil society and the Commission’s governing bodies is that the European Union has failed to live up to people’s expectations regarding economic convergence and inclusive growth. Although some recent growth may seem stable, the euro area as a whole was set back by a decade, and it was not until 2015 that GDP returned to the pre-crisis levels of 2008. The EESC sees a need for a pragmatic and ambitious initiative to reform the Economic and Monetary Union to make it more resilient and citizen-friendly. A reform of this kind would call for better economic policy coordination bringing both areas together in an intelligent way, with policy in northern and central Europe based more on competitive market rules and in southern Europe on greater solidarity, risk-sharing and integration. Added to this, it should not be possible for the European Union to refrain from common solidarity, particularly in extreme situations such as impoverishment and inequalities in wages and migration management, and nor should it be possible for each Member State to act as it pleases.












1.12.


The credit rating agencies were a key influence in ramping up the severity of the sovereign debt crisis. Their credibility can be called into question given that when, at the onset of the financial crisis in the US, the Lehman Brothers bank declared bankruptcy in 2008, it had retained the highest rating right up until the moment of its collapse. The EESC would suggest that the Commission strive to set up an independent international body with the task of evaluating credibility and impartiality regarding the adequacy evaluations conducted. It should also promote the creation of a European Credit Rating Agency.












1.13.


The EESC recommends that future crises in the European Union should be managed by striving for a better balance between fiscal and social objectives, adopting not just a purely macroeconomic approach to imbalances, but also taking on board other issues, such as income and wealth inequalities, poverty reduction, a strong and competitive business sector, inclusive growth and employment, climate change, the participation of women in the labour market and corruption. We need to think and act on the understanding that ‘human beings and human life take precedence over deficits’.




2.   General introduction









2.1.


The financial crisis unleashed in Greece, Ireland and Portugal was the sequel to the one that began in the US, and was exacerbated by these countries’ presence in the euro area. An uncontrolled economic boom ensued in the wake of looser controls on public spending and banking, coupled with the fact that public enterprises continued to obtain loans using the State as guarantor, leading to a huge increase in public spending. The results ranged from rapid and uncontrolled growth in budget deficits, to a negative impact on trade balances and the balance of payments.












2.2.


Financial liberalisation and the uncontrolled growth of bank credit, fuelled by aggressive sales practices on the part of the banks, led to over-indebtedness of households and SMEs — who were subsequently unable to pay their debts — and of the banking sector, with an increase in credit impairments as a result of speculation, posing a risk to the normal functioning of the banking system. The governments continued to pursue a pro-cyclical fiscal policy, leading to a dangerous deterioration in budget deficits and sovereign debt, and leaving the three Member States in question highly vulnerable to speculation on international investor loans. These bad practices meant that taxes paid by the public were used to prevent the major banks from declaring bankruptcy, thus further increasing sovereign debt.












2.3.


The global crisis starting in 2007-2008 revealed the weakness of a still-young currency and reached the euro area, hitting it hard (between the third quarter of 2011 and the first quarter of 2013). Although the first Member States affected were not part of the euro area, the truth is that when vulnerabilities were perceived in some countries of the euro area, the disruption was far-reaching. The Member States affected needed to take difficult decisions and use tax-payers’ money to prop up the banks financially to prevent them collapsing. Property and financial bubbles had built up and expanded over the previous years, with the banks running into difficulties after these bubbles burst. Combined with falling revenue and high levels of expenditure as a result of the major recession, levels of public debt in the EU rose significantly, from 70 % to 92 % of GDP on average in 2014 (1).












2.4.


Meanwhile, the credit rating agencies gave Greece, Ireland and Portugal a ‘junk’ rating, prompting international investors to raise interest rates to levels that made it impossible for these Member States to finance their budget deficits on the financial markets. To avoid bankruptcy, they turned to the European Commission requesting loans with more affordable interest rates to fund their activities and cover at least public salaries and social benefits. The Commission turned to the IMF for assistance, in view of its extensive experience in this field, in setting up a consortium (Troika) consisting of the Commission, the ECB and the IMF. They lent the Member States the amounts necessary to avoid default, which in turn entailed accepting ‘economic, financial and fiscal adjustment programmes’ with the following general objectives:






—


structural reforms to boost potential growth, create jobs, and improve competitiveness and the structural deficit (it should be noted that during this period and as a result of it, unemployment increased exponentially along with the collapse and insolvency of thousands of businesses, the social dialogue was suspended and labour laws were revised, to the detriment of the workforce), fiscal consolidation through structural measures and better, more effective budgetary control,










—


deleveraging the financial sector and recapitalising the banks,










—


recapitalisation, accomplished with the Member States concerned acting as guarantors and assuming liability, thereby contributing to the exponential growth of sovereign debt.
















2.5.


These measures, known as ‘austerity measures’, had a devastating effect on people who were already grappling with the increase in unemployment and high levels of debt, as well as on firms, mainly SMEs adversely affected by the lack of bank credit and a very significant decline in economic activity. The Troika displayed total indifference to the drastic consequences of its policies on the social dimension and on business structure, with SMEs bearing the brunt.












2.6.


The EESC acknowledges that the scale of the crisis has in fact challenged the economic, social and even political resilience of the EU in general and the Economic and Monetary Union (EMU) in particular. In order to prevent the crisis, it has become clear that it would not have been enough to take the purely quantitative aspects of a Member State’s growth into consideration: quality of growth also needs to be evaluated, that is to say, the macroeconomic factors which may or may not underpin the sustainability of the process need to be identified (2). If controls of this type had been conducted effectively, the crisis would certainly not have assumed the catastrophic proportions that it did in those Member States.




3.   Brief description of the events leading up to the Troika’s intervention in Portugal









3.1.


When it still had high customs tariffs and duties and its own currency, allowing devaluation, the Portuguese economy’s trade balance deficit between 1974 and 1995 stood at 9,1 % of GDP on average; from 1996 to 2010, during which time the euro started being used as the currency, the average trade deficit stood at 8,5 % of GDP. These figures show that the euro cannot be deemed responsible for the loss of competitiveness.












3.2.


Thus, the main reason for Portugal facing a public debt crisis is not that the export sector has lost competitiveness, but because adoption of the euro meant removing the automatic stabilisers which helped maintain acceptable levels of net foreign debt and keep the budget deficit under control. The explanation for the causes of the Portuguese crisis prompted a different approach to how best to respond to this crisis — very different to the one adopted by the Troika (3).












3.3.


The EUR 78 billion (about 45 % of GDP) financial package would cover the 2011 to 2014 period and came with the promise of safeguarding Portugal’s financial stability, and that of the euro area and of the European Union. There were 222 measures in the programme, with an impact on a variety of sectors; during its period of application, various revisions were carried out, introducing austerity measures which were even more stringent. These measures were seen as a comprehensive plan for completely reforming the country (4).




4.   Brief description of the events leading up to the Troika’s intervention in Ireland









4.1.


When it joined the EU, Ireland’s average income was 63 % of the EU average; after a few years it managed to achieve 125 % of the EU average, that is to say, it was above the European average. It remains so today, despite the crisis. The golden period of economic growth occurred from 1994 to 2000, during which GDP rose by an average of 9,1 % per annum. Nevertheless, from 2008 to 2009, GDP collapsed by 13 % per annum. Internal demand entered into freefall from early 2008 onwards. The austerity policy following the financial adjustment programme led to a decade being lost (5).












4.2.


In the first few years after the euro was introduced and up to 2007/2008, Ireland experienced a property boom and prices sky-rocketed. The credit boom was highly concentrated in speculative property loans. When the financial crisis hit and property price increases came to an end, tax revenue collapsed dramatically since it was closely tied in with the property boom. The result was a sharp increase in the deficit, badly affecting the financial system at the same time, and the share prices of the major Irish banks collapsed (6).












4.3.


On 21 November 2010, Ireland became the second country in the euro area to ask for financial assistance. The programme comprised a EUR 85 billion loan, EUR 35 billion of which was earmarked for the financial system (7). On 14 November 2013, the Eurogroup concluded that the economic adjustment programme had been a success and that Ireland would be able to exit the programme at the end of the year.




5.   Brief description of the events leading up to the Troika’s intervention in Greece









5.1.


Between 2001 and 2007, the Greek economy, after the Irish one, was the one with the highest rate of growth in the euro area, with average GDP growth of 3,6 % between 1994 and 2008. However, during these years of consecutive growth, endemic macroeconomic imbalances and structural shortcomings were exacerbated by the weakness of the political system at national and European level.












5.2.


The national savings rate dropped about 32 percentage points between 1974 and 2009, contributing to the current account deficit and increasing the chronic foreign debt. Unbridled public expenditure, combined with a failure to ensure adequate revenue from taxes, resulted in an accumulation of public debt (8).












5.3.


In August 2015 Greece was granted a third stability support programme through a supplement to the Memorandum of Understanding, which set out in detail the political conditions required, including a social impact assessment, as a way for the Commission to feed into the process and also as a manual for guiding and monitoring its implementation. This followed Commission President Jean-Claude Juncker’s insistence — and guidelines — in 2014, that ‘in the future, any support and reform programme [should go] not only through a fiscal sustainability assessment[,] but through a social impact assessment as well’, which was likewise aimed at ensuring that the ‘social effects of structural reforms [are] discussed in public’. The Commission is fully aware of the social conditions in Greece, deeming the improvement thereof to be essential for achieving sustainable and inclusive growth (9).












5.4.


By a decision of the European Council on 15 June 2017, an additional loan has been granted to Greece to assist economic, financial and social recovery.




6.   The macroeconomic, social and financial results of the adjustment programme









6.1.


In general, it can be argued that the only success that can be attributed to the adjustment programmes was that they made it possible for the Member States (Ireland and Portugal) to leave the Excessive Deficit Procedure and again access the financial markets on acceptable financial terms. Reducing the budget deficit and increasing exports helped to improve the external current account balance (goods, services and capital); economic growth and employment have shown an upturn since 2014. All the remaining indicators continue to have a drastic effect on social well-being and to undermine macroeconomic factors, something that will continue in the very long term. Some of the damage caused will be permanent, such as the brain drain of highly-skilled people, resulting in a negative impact on potential growth in innovation and development in their countries of origin, a sharp rise in poverty and inequality in incomes, access to basic healthcare, and people’s general well-being (10).




7.   Lessons learned that must lead to change and innovation in European policies









7.1.


The European Union — and the euro area — were caught completely unprepared for tackling a financial crisis in their Member States, inducing them to accept the IMF proposals in their totality instead of adapting them to the common values and standards of European solidarity. In the case of Greece, the European Union wasted precious time before reacting to the problem, and its initial suggestions were neither clear not definitive — for example, the total amount of the loan needed was changed several times due to hesitations on the part of the Commission, thus allowing speculation on the markets and leading to a further deterioration in a situation that was already bad.












7.2.


The economic, financial and fiscal adjustment programmes implemented in Greece, Ireland and Portugal were drawn up by the IMF and in part reflected the same rationale pursued by the IMF in periods of crisis in the 1980s in Africa and in the 1990s in some Asian countries. In these cases, the devaluation of the currency through the exchange rate mechanism played an effective role in maintaining growth and easing the balance of payments, thereby achieving macroeconomic stabilisation, in particular fiscal consolidation and the stabilisation of inflation, as well as boosting exports (1). What was new in the case of Greece, Ireland and Portugal was that this was the first time that such programmes had been implemented in an area with a single currency (without resorting to a currency devaluation) and in countries that belonged to the European Union and the euro area. In the case of these Member States, where the objectives were to correct fiscal and external imbalances and restore confidence, the IMF considered that significant refocusing of the economy was needed since growth in GDP was expected to be low (2). Thus the adjustment programmes sought to achieve fiscal consolidation by means of austerity policies focusing on radical cuts to public expenditure and long-term structural measures, such as reform of taxes and labour and pay legislation in order to reduce States’ deficits and increase their revenue. The austerity policy was implemented by ‘internally devaluing the components of the economic and social model’.












7.3.


The overall assessment of the IMF programmes carried out by its Independent Evaluation Office (July 2016) indicates that although pre-crisis surveillance had correctly identified the problems in the three countries, it failed to anticipate and weigh up the scale of the risks that later proved to be fundamental in terms of their negative effects, contributing to imbalances in the performance of the adjustment programmes. Furthermore, it refers to inconsistencies in coordination between the Troika partners in implementing and complying with the euro area instruments (EMU, SGP, EDP and the European Semester), adding that the training of the negotiating teams and the responsibilities of its members were not clearly defined and that lessons from previous crises were not always taken into account.












7.3.1.


Austerity measures triggered a ‘vicious cycle’ in which austerity led to recession, followed by more austerity, resulting in a catastrophic decrease in GDP, which shrank to the levels of 10 and 20 years ago, cuts in public and private investment spending and the collapse in the banking system. This triggered a failure of the productive system (SMEs and family firms, and the self-employed) and catastrophic severity at all levels of social protection.












7.4.


The shortcomings and inconsistencies in preparing assistance programmes were, generally speaking, the following:






—


the structural dimension of the crisis was overlooked,










—


the level of company and household indebtedness was underestimated,










—


the impact of internal debt on growth and job creation was underestimated,










—


State reforms did not touch on fundamental structural aspects,










—


structural reform of the economy was whittled down to the devaluation of internal competitiveness factors (wages, longer working hours, restrictive labour reforms, drastic tax increases, etc.),










—


the time frame for implementing the programmes was limited,










—


it is extremely difficult to achieve internal and external balance at the same time when both present very high deficits,










—


budgetary consolidation measures, applied above all on the expenditure side in a severe recession, where the country concerned has no mechanism for currency depreciation and when its partners are doing exactly the same, have not succeeded in any country in the world, at any point in history. The consensus today is that such measures are deemed recessionary in the short term and the scars they leave on an economy are often permanent,










—


inadequate fiscal multipliers led to gross errors.
















7.5.


Any ‘adjustment programme’ must reflect all political aspects and dialogues important to the success of the programme, but must always include ‘distributional impact indicators’ for the adjustment measures, with a specific focus on identifying the effects on the social dimension and on businesses at the most diverse levels. It must also provide for compensation measures so that these negative effects (e.g. business failures, rising unemployment rates, wage cuts, increased poverty and higher emigration) can be tackled successfully, through recovery programmes, so as to avoid dramatic social situations, including emigration. All sectors must be winners: it must not be a case of winners and losers, as happened with the programmes implemented in Greece, Ireland and Portugal.





Brussels, 14 February 2018.


The President of the European Economic and Social Committee

Georges DASSIS




(1)  Easterly 2002; IMF (2010) Greece Request for Stand By Arrangement; Country report No 10/110, May; Reflection paper on the deepening of the economic and monetary union, European Commission, 31 May 2017.

(2)  See the EESC opinion on the subject of Macroeconomic imbalances (OJ C 218, 23.7.2011, p 53).

(3)  ZBW — Leibniz Information Centre for Economics (Intereconomics 2013).

(4)  ZBW — Leibniz Information Centre for Economics (Intereconomics 2013).

(5)  ZBW — Leibniz Information Centre for Economics (Intereconomics 2013).

(6)  EESC Study ‘The impact of anti-crisis measures and the social and employment situation: Ireland’ (2013).

(7)  ZBW — Leibniz Information Centre for Economics (Intereconomics 2013).

(8)  EESC Study ‘The impact of anti-crisis measures and the social and employment situation: Greece’ (2013).

(9)  Study of the Economic Governance Support Unit of the EP on The Troika and financial assistance in the euro area: successes and failures (Feb 2014).

(10)  See appendix I with the main statistical indicators.


APPENDIX 1
For reference please note the following basic indicators:














Basic indicators


Greece


Ireland


Portugal




 


2008


2013


2016


2008


2013


2016


2008


2013


2016




Total unemployment rate


8 %


27,5  %


23,4  %


6,4  %


13,1  %


6,9  %


7,8  %


16,2  %


10,5  %




Youth unemployment rate (15-24)


22 %


58,3  %


48 %


12,8  %


27,5  %


16 %


16,5  %


38,1  %


28 %




Poverty rate


28,7  %


35,7  %


36,4  %


22,3  %


30,5  %


26 %


19,7  %


24 %


23,1  %




GDP growth


-0,3  %


-3,2  %


2,1  %


-4,4  %


1,1  %


5,2  %


0,2  %


-1,1  %


1,4  %




Budget deficit as a % of GDP


-7,7  %


-6,1  %


-1,2  %


-7 %


-7,2  %


0,5  %


-2,6  %


-2,9  %


-2,1  %




Public debt as a % of GDP


100 %


177,9  %


178,8  %


42,4  %


119,5  %


75,4  %


71,7  %


129 %


130,4  %





Source: Eurostat





The social effects and effects on the corporate structure of the austerity programme in Portugal







—


Income from work fell by 12 % from 2009 to 2014.










—


The drop in income was extremely unequal and to a great extent regressive, mainly affecting the ‘middle class’, the poorest in society and small family businesses.










—


The fact of incomes in Portugal shrinking by 5 % acted in a counter-cyclical way to trends in Europe, where family incomes grew by 6,5 % (between 2009 and 2013).










—


There was a considerable rise in inequality due to the decrease in the lowest wages and a significant increase in ‘precarious employment’, which meant an increase in the number of employed, but poor, workers.










—


With a deterioration in income poverty, the poverty rate rose by 1,8 %, from 17,7 % to 19,5 %, and the number of poor reached 2,02 million in 2014.










—


the shrinking resources of the poorest in the population affected the most vulnerable (older people and children).










—


In the course of the adjustment programme, more than 400 000 Portuguese emigrated, mainly people with high-level scientific and technical qualifications (1), and thousands of businesses (mostly SMEs and family businesses) declared bankruptcy.





The social effects and effects on the corporate structure of the austerity programme in Ireland







—


In 2009, the guaranteed minimum income was reduced by 15 %, but this was put back to its original level in 2011.










—


The adjustment of the domestic, retail and construction markets entailed major job losses in these sectors (2) as a result of the bankruptcy of thousands of companies.










—


The unemployment rate rose by 6,4 % in 2008 to 15 % in 2012; this mainly concerned long-term unemployment and youth unemployment, which was in line with rates in southern European countries (around 30 %).










—


From 2008 onwards, emigration rose rapidly (82 000 emigrants in 2012 alone).










—


Welfare benefits were reduced by about 15 %.










—


In addition to public sector and welfare benefit cuts, the strategy was to cut back staff in the public sector (health, education, security and the civil service) through voluntary redundancies.










—


Net income in the lower decile fell by 25 %.










—


The percentage of the population at risk of poverty rose to 15,8 % (around 700 000 people, 220 000 of whom were children) (3).










—


The complete standstill in construction programmes created a shortage in the availability of housing that lasted for a decade after the collapse. Businesses linked to the sector, mainly SMEs, were hard hit, leading to very negative consequences for employers and workers.





The social effects and effects on the corporate structure of the austerity in Greece

The crisis and anti-crisis policies carried out in Greece had both direct and indirect detrimental effects on businesses (bankruptcy), employment and the social dimension. The impact was not felt equally by workers, pensioners, tax-payers and their families:






—


the unemployment rate was 13,5 % in October 2010; it rose to 27,5 % in 2013,










—


youth unemployment remains at around 45,5 %,










—


severe income losses are related to the high rates of unemployment,










—


drastic cuts in wages and pensions, combined with part-time jobs, over-indebtedness and high taxes, drastically reduced family incomes, corroded purchasing power and marginalised large segments of the population,










—


civil society organisations have faced severe financial problems, which made it impossible to participate consistently in social and civil dialogue, or adequately address the challenges arising. This may weaken the quality of democracy since it can lead to the under-representation of the various economic and social interests,










—


market monitoring mechanisms offered by civil society are deteriorating due to the lack of human and financial resources, leading to gaps in protection for a wide variety of interests, including consumers,










—


social protection levels, education and health were considerably weakened as a consequence of the cuts (4),










—


the situation continues to be dramatic with regard to access to healthcare, purchasing of medicines and social protection,










—


these situations exacerbated poverty levels, with poverty now affecting more than 20 % of the population, increasing inequality.






(1)  Desigualdade de rendimento e Pobreza em Portugal (‘Inequality of income and poverty in Portugal’) (FFMS, September 2016).

(2)  EESC study on The impact of anti-crisis measures and the social and employment situation: Ireland (2013).

(3)  ZBW — Leibniz Information Centre for Economics (Intereconomics 2013).

(4)  EESC study The impact of anti-crisis measures and the social and employment situation: Greece (2013).



APPENDIX 2
The following amendment was rejected during the discussion but received over a quarter of the votes.

Point 1.7.

Amend as follows:






 



Digitisation, automation and artificial intelligence (AI) are radically changing the economy, labour market (including new forms of work), skills and society, posing a challenge to its structures (including the automatic stabilisers) and consequently adding unforeseeable numbers of people to those who are already excluded. The EESC recommends that the Commission set up a ‘universal, basic European unemployment insurance’ scheme to respond effectively to the challenge and guarantee decent social protection available to everyone throughout their working lives (15-65 years). Regarding the issue of poverty eradication, the Commission should also introduce a ‘minimum living wage’, adopting a European approach and commitment to ensure that there is ‘no-one left behind’.







Reason

The proposal is infeasible in this form, and also does not fall within the competence of the Commission.
The amendment was rejected by 74 votes to 129 with 13 abstentions.