Free-fall of labour income in South Europe
by Martin Foehler and Alberto Paez
Between 2007 and 2014 the European South suffered a huge loss in labour income for all respective income classes.
Especially for Greece, situation is appalling and can be hardly compared to other southern neighbors, especially referring to the medium-income and top 10% groups. Nonetheless, for the bottom 10% group Spain's situation is slightly worse than Greece's one, with Portugal lagging third, Italy and France in relatively better position.
Precisely, Spain's lower incomes suffered a loss of 69%, Greece's respective class, 67%, while in medium income groups, France is the only member-state of the region that did not count losses (0%). In spite of negative trend for all member-states concerned, France's top 10% registered accumulative gains up to 6%.
This gloomy image for the European South becomes even more strained when compared to Germany's labour market status. During the same period, all respective income classes registered gains, ranging from 5 to 9%. Germany is the only Eurozone member-state that was not affected by austerity politics, standing out immensely increasing trade surplus balance, thus pushing all relavant sectors and the labour market into a positive direction.
On the contrary, long-term recession and market stagnation was a common feature for all member-states of Southern Europe, with Greece implementing a third fiscal consolidation program, Portugal and Spain still missing steady recovery from their previous bailout programs.
This massive downfall of labour income has been affecting all connecting areas of public economy, like social contribution, consumption, growth and tax collection, while other qualitative and macroeconomic features of domestic economies have been harshly damaged - i.e social exclusion, poverty, unemployment. Should this trend keeps on further damaging the markets and weakening labour income, it might be possible for a growing number of member-states -i.e. except for the ones where we are already observing surge of populist, anti-establishment or far-right movements- to start avoiding respecting EU/Eurozone binding decisions., causing a decision- and policy-making chaos.
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Martin Foehler and Alberto Paez are Policy Analysts at Bridging Europe.
January 6, 2017