What needs to be done to bridge the prosperity gap in the EU

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In terms of rhetoric and political commitments, EU social policy has motored full speed ahead since Jean-Claude Juncker was elected President of the Commission in 2014. The Gothenburg Social Summit in November last year developed the vision of a “deeper and fairer economic and monetary union.” EU leaders proclaimed unanimous support for the key principles laid down in the European Pillar of Social Rights, which sets out to support fair and well-functioning labour markets and welfare systems.

In reality, however, the EU’s different regions have drifted apart economically and socially, and also in regards of their support for the European project. The Great Recession reversed a previous trend towards increased economic and social convergence among the member states. Prior to 2008, most social and employment indicators were moving in the same direction across the Union. After 2008, by contrast, the pattern has been a lasting polarization between the southern and peripheral member states on the one hand, and the northern and central member states on the other.

According to the latest summary from the EU’s own statistical agency, Eurostat, around 120 million EU citizens suffer from poverty or social exclusion, or run the risk of falling into such a condition. This represents almost one in four EU citizens. And the differences between the member states are great. The situation is worst in Bulgaria, Romania, and Greece. By contrast, citizens of the Czech Republic, Finland, the Netherlands, and Sweden run a significantly lower risk of falling into poverty or social exclusion. Unemployment, too, has hit the member states differently.

Although overall unemployment in the EU is approaching pre-crisis levels at a steady pace, approximately 18 million Europeans are out of work. Large disparities among the member states remain. While the unemployment rate in Greece is 20.7 percent and in Spain 16.4 percent, Germany and the Czech Republic have a rate well below 4 per cent (figures from Eurostat, December 2017). Youth unemployment varies even more. In the states hardest hit by the economic crisis, unemployment has become one of the key drivers behind growing income inequalities.

The EU thus faces a great social and economic challenge; a long-lasting prosperity gap has established itself between Europe’s prosperous economies and the countries lagging behind. And the search for solutions takes place in a context of great success for those political forces that want to roll back EU cooperation, reduce mobility in the single market and close the borders to asylum seekers. Britain’s choice to leave the EU is the clearest example of this agenda, and its consequences for Europe remain to be seen.

So what needs to be done to bridge the prosperity gap in the EU? We asked innovative researchers in economics, law, and political science to tackle this question and to seek out new solutions within their respective fields of expertise. Their contributions cover crucial policy challenges such as youth unemployment, the sustainability of social insurance systems, the implementation of European social rights, and the economic costs and benefits of free movement. Moreover, they analyse fundamental mechanisms that limit or condition the evolution of a European social dimension, such as differing levels of trust in countries and regions within the EU, and the challenge posed by radical-right parties in Europe.

The insights presented by the researchers help to clarify the far-reaching measures that will be needed to counteract the prosperity gap that emerged in the EU during the crisis. One important observation is that the Union’s basic structure was not intended to help its most vulnerable member states or even those individuals most in need of it. On the contrary, the responsibility for social policy primarily lies with the member states, whose objectives and capacities vary considerably. Economic, legal, and political mechanisms built into the EU system are thus fuelling the problem, and must be addressed.

To bridge the prosperity gap requires the EU and its member states to gradually restore the balance between market integration and social protection. The Union’s future role for Europeans depends on its ability to contribute to this process and counteract the prosperity gap that emerged during the crisis. If this fails, larger numbers of Europeans could very well resort to nationalism and Europe once again become a continent in disintegration.

Edited by Ulf Bernitz, Stockholm University, Moa Mårtensson, Thomas Persson, Uppsala University, Sweden and Lars Oxelheim, University of Agder, Norway, Research Institute of Industrial Economics (IFN) and Lund University School of Economics and Management, Sweden

Bernitz BridgingBridging the Prosperity Gap in the EU is available now.

Read Chapter One on Elgaronline.




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