The Impact of the Crisis on Poverty and Socio-Economic Inequalities in Europe

Abstract

We want to investigate the factors that have had an impact on poverty rates and inequalities in Europe and enquire about the possibility to reduce them in the future. Our enquiry is largely novel in the literature on the topic. The immediate causes of the increase in poverty rates and inequalities have certainly been the financial crisis, the pandemic and the increase in unemployment that derived from them in almost all European countries. In a nutshell, the underlying novel factors that we underline can be attributed to the EU institutions and policies, the ensuing asymmetries and the situation in “core” and “peripheral” countries, more specifically: 1) The “credit-led” strategy of growth pursued by peripheral countries. 2) The “export-led” strategy of growth pursued by core countries. These strategies implicated pernicious imbalances that reflected on poverty rates and inequalities. We find also that only the welfare state has succeeded in mitigating the negative impact on poverty and equity, but at the cost of further burdening public finances, especially in peripheral countries, casting a shadow on the ability to perform the same role in the future. In the future what is needed to avoid asymmetries and imbalances in the European Union is a common strategy of growth.