Financial distress in EU ‘rising’

Irish households have lost a sixth of their disposable income due to government changes to benefits and taxes over the past five years, according to an EU study.

While employment is showing signs of increasing, up to half those at work are in part-time jobs increasing financial distress on families and individuals. While employment is showing the first signs of stabilising with a mild increase in the numbers employed across the EU, the kind of work and lower pay are increasing poverty and financial distress despite the crisis being official over.

The European Commission’s quarterly study says, so far, the turnaround in economies is not benefitting ordinary people, partly due to a drop in the real value of wages and partly due to people who need full-time work making do with part-time jobs.

It has led Employment Commissioner Laszlo Andor to warn that the fragile recovery is at risk of not improving the lives of many lower-income groups in particular.

“Member states and the EU should further step up their efforts to ensure that nobody is left behind as we try to exit the crisis. In particular, we should focus our efforts on investing in people in line with the guidance set out in our Social Investment Package and the recommendation on the Youth Guarantee”.

The study, concentrating on the last three months of 2013, said that the drop in both cash and in-kind spending by the Government in common with a few other countries was “very significant”.

In past recessions the effect, especially on poorer members of society, was cushioned as social spending compensated, but because of the pressure to meet EU targets on debt and deficit less money was available — and lower social spending is likely to become a permanent factor in national budgets.

In 12 countries where changes in taxes (income, social contributions and Vat) and in cash benefits (including pensions) occurred, the impact was particularly strong in Ireland, Greece, Portugal, Spain and Lithuania.