Eurostat figures reveal impact of cuts

The effects of government spending cuts and a drop in purchasing by households shows in the latest figures released by Eurostat where consumption fell the most of all EU countries after Greece.

The GDP figures held up relatively well falling from 128% of the EU average in 2010 to 127% last year, making Ireland the fourth richest country in the union on paper.

They have dropped from 150% in 2007 at the height of the boom when the country had the highest GDP in the EU after Luxembourg. However, GDP figures especially for Ireland are notoriously unreliable as they include sums passing through the country and profits of multi-nationals.

Eurostat introduced a new method of measuring the wealth of individuals in the EU called actual individual consumption. This measures not just the money spent by households on food and domestic goods, but also includes the money the government spends that benefits individuals such as on health and education.

This shows that since 2009 Ireland’s actual individual consumption has dropped from 109% of the EU average in 2009 to 100% last year — putting the country well below the average of the other eurozone countries, 107%.

It places consumption per person in Ireland 12th among the EU states, below Italy and almost all the major countries and just ahead of Spain. The only other “old” member states in this category under the EU average are Greece and Portugal.

This reflects the Government taking more than €3bn out of the economy each year for the past three and spending an increasing amount on interest on debt repayments. Spending on health alone last year was cut by 6.6% on the previous year.

In all, actual individual consumption dropped in 12 member states and increased in 11. As well as spending rising in the triple A countries of Germany, Finland and Austria, it also rose most in Poland that is the only country in the Union that has not experienced any recession.

It also rose in Lithuania and Latvia, both coming out of recession while Latvia’s GDP jumped the most from 51% of the average in 2010 to 58% last year.

Iceland, which got a bailout from the IMF when its banks collapsed, also saw an increase in its consumption after a dramatic fall in 2008. Its GDP, however, has continued to fall.

GDP rose in 11 countries including the countries most sheltered from the eurozone crisis, including Germany, Austria, Sweden, Finland, Luxembourg and Poland. It fell in 13 countries including the Netherlands, Denmark, France, Britain and Spain. Only Italy and Malta saw no change in either actual individual consumption or GDP, but Italy is considered to be in a low-level recession for years.