PARIS (IDN) - A new poll finds that Europeans are growing dissatisfied with the inequities of the economic system, which are also rooted in the "still rising unemployment" that, as the OECD's Chief Economist Pier Carlo Padoan avers, present "the most pressing challenge for policy makers" in the euro area.
The euro area consists of 17 members of the 27-nation European Union: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.
The 34-nation OECD (Organisation for Economic Co-operation and Development) warns governments that urgent action must be taken to reduce unemployment, which has risen to "dangerous levels" in many countries.
Jobs are being created in some parts of the OECD, but more must be done, states the organisation's latest Economic Outlook. "While labour markets are set to firm gradually in the United States and Japan over the coming two years, unemployment is likely to continue to rise further in the euro area, stabilising above 12% only in 2014," it warns.
The report makes a strong plea for addressing youth unemployment and adapting policies to ensure that cyclical unemployment does not become structural. Similarly, wider product market reforms – particularly in the retail trade and professional services sectors – offer the best potential for creating jobs, it adds.
According to the OECD, government policy should focus on measures to enhance growth, make public finances more sustainable and growth-friendly and implement structural reforms to boost investment and create jobs. "In Europe, bolder measures to solve the financial and banking crisis once and for all are needed to ensure a faster, stronger and more sustainable recovery. Construction of a full-fledged banking union needs to be speeded up," avers the report.
Poll
According to a new poll by the Pew Research Center, a major casualty of the euro crisis has been Europeans’ faith in the fairness of their economic system. "In what is now the fifth year in the wake of the Great Recession, Europeans believe that inequality is now a major problem in their societies and think that things will only get worse," writes Bruce Stokes, Director of Global Economic Attitudes at the Pew Research Center's Global Attitudes Project.
One consequence of the euro crisis has been a rise in income inequality in many parts of Europe. Inequality can be measured in various ways. One gauge is how much more of national income is earned by the top fifth of the population compared with that controlled by the bottom fifth. That ratio is on the rise in seven of the eight EU nations surveyed, according to calculations by Eurostat, the European Union’s statistical agency.
In 2010, the latest data available, the top 20% of Greek earners commanded 5.6 times as much of Greek national income as did people living in the bottom 20% of the income distribution. In 2011, the Greek inequality ratio was 6.4. Over the same period, there was a similar rise in inequality in Italy, from 5.2 to 6.0, and a slightly smaller jump in Spain, from 6.9 to 7.5.
Analysing the results of the poll, Stokes says: A strong majority (a median of 77%) of Europeans surveyed think that the current economic system generally favours the wealthy. This includes an overwhelming 95% of the Greeks, 89% of the Spanish and 86% of the Italians. Even seven-in-ten (72%) Germans, who have fared economically better than other European, say the system is rigged.
Stokes adds: "Moreover, the vast majority of all Europeans (a median of 85%) surveyed overwhelmingly agree that the gap between the rich and the poor has increased in the past five years. This is an almost universally shared sentiment, with nearly nine-in-ten Spanish, Germans, Italians and Greeks agreeing.
"And half or more people in all eight EU countries surveyed think the gap between the rich and the poor is a very big problem. This is a particular concern in Greece (84%), Spain (75%) and Italy (75%).
"With the International Monetary Fund predicting continued economic stagnation in much of Europe for some time to come, there will be no rising tide to lift all boats. Public attitudes toward the distribution of income and wealth could prove to be a growing political issue as Europe wrestles with the consequences of the euro crisis."
Economic outlook
OECD's Chief Economist Padoan, who is also Deputy Secretary-General of the organisation, writes in an 'editorial to the OECD's latest Economic Outlook, "The more positive news is that in many euro area countries adjustment, both fiscal and structural, has been going on for several years."
He expects government debt ratios to start declining soon with positive implications for market risk assessments. "And once debt ratios begin to decline, only modest additional fiscal tightening would be needed to bring them to safe levels over the medium term. The improvement in competitiveness in some countries also reflects structural efforts."
"However," he adds, "reform fatigue is mounting as visible results in growth and jobs still fail to materialise, in part because reforms can take time to bring results but also due to the weak macroeconomic environment. Higher wages and product market liberalisation in surplus countries would provide a more symmetric and effective rebalancing, while supporting growth."
Presenting the OECD's latest Economic Outlook on May 29, the organisation's Secretary-General Angel Gurría said: “The global economy is strengthening gradually, but the upturn remains weak and uneven. Supportive monetary policies, improving financial market conditions and a gradual restoration of confidence are at the root of the recovery. Also, the fiscal adjustment of the last few years is beginning to pay off. Several countries are close to stabilising their government debt-to-GDP ratios and ensuring a gradual decline in indebtedness over the longer term."
Expressed in figures, this is how the OECD's latest Economic Outlook looks like: world real gross domestic product (GDP) is projected to increase by 3.1% this year and by 4% in 2014. Across OECD countries, GDP is anticipated to rise by 1.2% this year and by 2.3% in 2014, while growth in non-OECD countries is expected to rise by 5.5% this year and 6.2% in 2014.
In the United States, activity is projected to rise by 1.9% this year and by a further 2.8% in 2014. GDP in the euro area is expected to decline by 0.6% this year and then rebound by 1.1% in 2014, while in Japan GDP is expected to grow by 1.6% in 2013 and 1.4% in 2014. [IDN-InDepthNews – May 30, 2013]
2013 IDN-InDepthNews | Analysis That Matters
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