102089 E U
Public Disclosure Authorized REGULAR ECONOMIC REPORT 2 SUSTAINING RECOVERY, IMPROVING LIVING STANDARDS Public Disclosure Authorized
fall 2015 Public Disclosure Authorized Public Disclosure Authorized
economic policies in the European Union. European the in policies economic and prospects, developments, economic covers and Group World of the publication Bank annual asemi is (RER), Report Economic EU Regular The author –focus note). The team benefited from inputs from –focus note). inputs from author team benefited The –focus note), author (lead ram Aylin Isik-Dikmelik (lead Sunda Ramya -poverty), author (lead Inchauste Gabriel (Task Thomas Theo TeamCarroll, Leader), Laco, Matija (Task Doemeland TeamDoerte Leader), Aldaz- Enrique working on EU countries. team The of comprises authors economists staff by World Bank prepared is report This Union”. European in the Poor the of Protection the and States “Welfare covers RER this note of focus The Romania. Group, and in particular, Poland Croatia, Bulgaria, Bank World the with engagement operational a stronger historically had which countries European on information additional provides it Union, European the covers report the Netherlands and the United Kingdom. While the France, Belgium, Germany,Austria, Luxembourg, Ireland, comprises Europe Spain; Western and Italy, Portugal Southern Sweden; Europeand Lithuania Finland, Estonia, Latvia, Denmark, comprises Europe Northern Slovenia; and Republic Slovak Romania, Poland, Hungary, Republic, Czech Croatia, Bulgaria, map) EU (see patterns ment similar develop broadly share that sub-groups four uses : comprises Europe Central comprisesGreece, Cyprus, The report The Portugal - - -
Eu Central Directors, Country (Acting Francois Marteau Jean- and Bodewig to Christian grateful team is The Kowalczyk. Anna and Kircher Andrew team comprising Communication External an by managed are relations media and report the of dissemination The report. this of preparation the throughout advice excellent provided Cordella Tito Pinat. Magali and Petrovic, Suzana Otonel, T. Pilar Salgado Pauna, Catalin Vashakmadze, Emilia Skrok, Ekaterine Dospinescu, Silviu Andrei Schiffbauer, Sonia Plaza, Madzarevic-Sujster, Marc Sanchez, Luis Jose Stella Ilieva, Tulu Nicolaou, Natalie Balkir, Kantarovich, Alena Sanja Letelier, Raquel Kasek, Leszek Rodas, Corral Andres Paul Tu Cunha, Millan, Barbara Onal, Natalia Anil Chi Nguyen, at: found be can EU RERs previous and This comments. their for Poland and Romania Croatia, Bulgaria, of Finances of Ministries and likeance. Banks also Central teamto would the thank The Team Management guid their for Country the and Grosh Timmer, Hans Tatianareviewers Margaret and Didier Equity), and (Practice peer Manager,the Sanchez Poverty Management), Carolina Global Labor and Protection Social (Practice Manager, Mason Management), Andrew Global Fiscal and (Practice Manager,Izvorski Macroeconomics Fiscal and GlobalMacroeconomics Management), Ivailo Ireland Spain rope and the Baltic States), Baltic the (Director, and Kähkönen rope Satu Kingdom Luxembourg United Western Europe France Southern Netherlands Belgium www.worldbank.org/eurer. Slovenia Europe Germany Denmark Italy Croatia Austria Czech Rep. Sweden Malta otenEurope Northern eta Europe Central Slovak Rep. Poland Hungary Lithuania Estonia Latvia Greece Finland Romania Bulgaria Cyprus -
n ot e s a n d acknowledgments t ta b l e o f c o n t e n t s r o p e r c i
01 e c o n o m
r EXECUTIVE SUMMARY l a 05 u e g RECENT ECONOMIC DEVELOPMENTS r
u 06 e After a prolonged crisis that led to an increase in poverty… 10 …THE RECOVERY IS GAINING STRENGTH, FUELED BY PRIVATE CONSUMPTION AND SUPPORTED BY LOWER OIL PRICES, A WEAKER EURO AND THE ECB’S QE 13 LABOR MARKETS ARE IMPROVING 17 FISCAL CONSOLIDATION IS SLOWING 19 COUNTRIES CONTINUE TO IMPROVE BUSINESS REGULATIONS IN AN EFFORT TO BOLSTER GROWTH 25 OUTLOOK 26 THE EU NEEDS TO TURN TAILWINDS INTO SUSTAINED GROWTH 28 MEDIUM-TERM RISKS ARE SUBSTANTIAL 31 SPOTLIGHT ON CENTRAL EUROPE 35 FOCUS NOTE: WELFARE STATES AND PROTECTION OF THE POOR IN THE EUROPEAN UNION 36 EU MEMBER STATES ARE AMONG THE BIGGEST SPENDERS ON SOCIAL PROTECTION IN THE WORLD… 40 …NOT ALL COUNTRIES PROVIDE EFFECTIVE PROTECTION FOR THE POOR 44 MOST WELFARE STATES CUT SOCIAL ASSISTANCE SPENDING DURING THE CRISIS… 46 …WITH DIFFERING OUTCOMES FOR THE POOR 49 EU MEMBER STATES WOULD NEED TO PROVIDE ADEQUATE PROTECTION AND SOCIAL INVESTMENT FOR THE POOREST WHILE ENSURING FISCAL SUSTAINABILITY 52 REFERENCES f igur e s e s ur g fi
/
06 [FIG. 1]
THE CRISIS LED TO A SIGNIFICANT INCREASE IN POVERTY c o n t e n t s
IN SEVER AL EU COUNTRIES f o
07 [FIG. 2] l e b
YOUNG AND LESS SKILLED PEOPLE WERE MOST AFFECTED ta BY THE INCREASE IN POVERTY 08 [FIG. 3] HOUSEHOLD INCOME HAS DECREASED MORE THAN GDP IN GREECE 09 [FIG. 4] THE DECLINE IN LABOR INCOME AND EMPLOYMENT CONTRIBUTED MOST TO THE POVERTY INCREASE 10 [FIG. 5] GROWTH HAS PICKED UP PACE ACROSS ALL REGIONS FUELED BY CONSUMPTION 11 [FIG. 6] CONFIDENCE IS IMPROVING 12 [FIG. 7] THE COST OF BORROWING FOR ENTERPRISES AND HOUSE PURCHASES HAS REACHED A HISTORIC LOW 13 [FIG. 8] THE EU HAS LOST FEWER JOBS THAN THE US BUT FIRMS PERFORM WORSE 14 [FIG. 9] UNEMPLOYMENT R ATES ARE REACHING PRE-CRISIS LEVELS IN MANY EU COUNTRIES, except in the South 15 [FIG. 10] THE CUMULATIVE UNEMPLOYMENT RESPONSE TO A GDP GROWTH SHOCK IS LARGEST IN SOUTHERN EUROPE 16 [FIG. 11] YOUTH UNEMPLOYMENT IS DECLINING IN MOST EU COUNTRIES 17 [FIG. 12] SIGNIFICANT FISCAL ADJUSTMENT HAS BEEN ACHIEVED THROUGH DIFFERENT APPROACHES 20 [FIG. 13] DIFFERENCES IN THE BUSINESS ENVIRONMENT IN THE EU VARY SIGNIFICANTLY WITHIN AND ACROSS REGIONS AND OVER TIME 22 [FIG. 14] LARGE DIFFERENCES IN REGULATORY PRACTICES DEPEND ON WHERE SMES LOCATE THEIR BUSINESS 26 [FIG. 15] GROWTH R ATES ARE PROJECTED TO RISE ACROSS THE EU THOUGH INVESTMENT GROWTH REMAINS MODEST 32 [FIG. 16] POVERTY IS PROJECTED TO DECLINE t f igur e s r o p e r c i
37 [FIG. 17] e c o n o m
r EU MEMBER STATES SPEND ON AVER AGE MORE
l a ON SOCIAL PROTECTION THAN OECD COUNTRIES u 38 [FIG. 18] e g r THERE ARE FOUR DISTINCT EUROPEAN WELFARE STATES u e 40 [FIG. 19] SOCIAL ASSISTANCE SPENDING VARIES WIDELY ACROSS EUROPEAN WELFARE STATES 40 [FIG. 20] WITH VARYING IMPLICATIONS FOR THE COVER AGE OF BOTTOM 20 PERCENT 41 [FIG. 21] CATEGORICAL PROGR AMS DOMINATE SOCIAL ASSISTANCE SPENDING ACROSS EUROPEAN WELFARE STATES 42 [FIG. 22] HIGHER COVER AGE OF BOTTOM 20 PERCENT IS ACHIEVED MOSTLY THROUGH FAMILY BENEFITS AND SOCIAL EXCLUSION PROGR AMS 42 [FIG. 23] SOCIAL ASSISTANCE LEAKAGE TO THE RICH IS SUBSTANTIAL IN MANY EUROPEAN WELFARE STATES 43 [FIG. 24] LEAKAGE TO THE RICH IS MAINLY DUE TO FAMILY BENEFITS 43 [FIG. 25] LARGE BALANCED WELFARE STATES ARE THE MOST SUCCESSFUL IN POVERTY ALLEVIATION THROUGH SOCIAL ASSISTANCE 43 [FIG. 26] ONLY FEW COUNTRIES CAN AFFORD HIGH COVER AGE AND REASONABLE ADEQUACY 44 [FIG. 27] SOCIAL ASSISTANCE SPENDING FELL IN SEVER AL COUNTRIES DURING THE RECESSION WHILE SOCIAL INSUR ANCE SPENDING WAS PROTECTED 45 [FIG. 28] THE DECLINE IN SOCIAL ASSISTANCE SPENDING WAS MOST COMMON IN TRUNCATED AND LIMITED WELFARE STATES 47 [FIG. 29] CUTS IN SOCIAL ASSISTANCE SPENDING HAD DIFFERENT OUTCOMES ACROSS WELFARE STATES IN TERMS OF COVER AGE OF THE POOREST 47 [FIG. 30] INCREASE IN COVER AGE WAS ACHIEVED PARTLY THROUGH IMPROVEMENTS IN TARGETING ACCUR ACY b ox e s l e s b ta
/
e s x o b
/
08 [BOX. 1]
POVERTY TRENDS IN GREECE e s ur
15 [BOX. 2] g fi UNEMPLOYMENT ADJUSTMENT TO A GDP SHOCK IN EUROPE 21 [BOX. 3] DIGITAL DIVIDE OR DIVIDEND? 22 [BOX. 4] THE IMPORTANCE OF LOCAL BUSINESS REGULATION: THE CASE OF POLAND AND SPAIN 29 [BOX. 5] THE EU AND THE REFUGEE CRISIS 37 [BOX. 6] SOCIAL PROTECTION FUNCTIONS 39 [BOX. 7] TYPOLOGY OF SOCIAL PROTECTION SYSTEMS
ta b l e s
20 [TABLE 1] EASE OF DOING BUSINESS R ANKINGS IN THE EU t r o p e r c i e c o n o m r l a u e g r u e
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f o ABSPP ASSET-BACKED SECURITIES PPP PURCHASING POWER PARITY s t
PURCHASE PROGR a m i l
PSPP PUBLIC SECTOR PURCHASE PROGR AM / BRICS BR A ZIL, RUSSIA , INDIA AND CHINA
RER REGULAR ECONOMIC REPORT o n s CAB CURRENT ACCOUNT Bal ance i at
SME SMALL AND MEDIUM ENTERPRISE vi CBPP COVERED BOND PURCHASE PROGR AM e
SILC SURVEY ON INCOME AND bbr a
EAPP EXPANDED ASSET PURCHASE PROGR AM LIVING CONDITIONS a n d
ECB EUROPEAN CENTR AL BANK UK UNITED KINGDOM m s
EU EUROPEAN UNION US UNITED STATES y o n GDP GROSS DOMESTIC PRODUCT QE QUANTITATIVE EASING r a c ICT INFORMATION AND COMMUNICATION VAR VECTOR AUTOREGRESSION TECHNOLOGY VAT VALUE-ADDED TAX IMF INTERNATIONAL MONETARY FUND WEO WORLD ECONOMIC OUTLOOK MTO MEDIUM TERM OBJECTIVES
OECD ORGANIZATION OF ECONOMIC CO-OPER ATION AND DEVELOPMENT
l i s t o f c o u n t ri e s
BG BULGARIA CY cYPRUS
HR CROATIA EL GREECE
CZ CZECH REPUBLIC IT ITALY
HU HUNGARY PT PORTUGAL
PL POLAND ES SPAIN
RO ROMANIA AT AUSTRIA
SK SLOVAK REPUBLIC BE BELGIUM
SI SLOVENIA FR FR ANCE
DK DENMARK DE GERMANY
EE ESTONIA IE IRELAND
FI FINLAND LU LUXEMBURG
LV LATVIA NL NETHERLANDS
LT LITHUANIA UK UNITED KINGDOM
SE SWEDEN E x e c u t i v e Summary t r
o The European Union (EU) is gradually emerging this measure - surpassed all other EU countries and – p e
r measured by an absolute poverty line of USD5 in PPP terms
from a protracted economic downturn that led to an c i increase in poverty in many countries. Poverty rates – exceeded poverty in several Central European countries, – as measured by the share of the population with an including Hungary, Poland, Slovenia and Slovak Republic. income of less than 60 percent of the 2008 median in- The increase in poverty in the EU has been mainly due to a e c o n o m
r come – increased between 2008 to 2012, particularly in decline in labor incomes, employment and, to a lesser l a
u Southern European countries that were most affected by extent, social assistance spending. e g r
the downturn. By 2012, poverty in Greece - according to u e
Many EU countries cut social assistance spending increase in poverty. Building on the lessons from the crisis, during the crisis, which, combined with the design important reforms for making social protection systems of the programs, sometimes contributed to an in- more effective include the introduction of guaranteed crease in poverty. While EU countries are among the minimum income (GMI) programs, maintaining the effec- biggest spenders on social protection in the world, some tive coverage and adequacy of existing social exclusion EU countries are unable to provide effective protection programs, and reducing the leakages of social assistance for their poorest citizens. In some, cuts in social assistance transfers to the rich. spending during the crisis did not help ameliorate the
Fueled by consumption, the EU recovery is gaining from 2014. After leading the recovery in 2014, robust strength across all EU regions. Growing wages and private consumption growth was sustained in the first half employment, supported by low consumer-price of 2015 across all EU regions, as real disposable household inflation, have raised household incomes and sup- income grew strongly. That was largely due to higher ported households’ willingness to consume. Real wages and employment combined with exceptionally low GDP growth rose by a moderate 1.8 percent year-on-year consumer price inflation, driven by low energy prices. Un- in the first half of 2015, below the 2.2 percent OECD average employment among the young – who suffered the largest and half the global pace of expansion. The economy of increase in poverty during the crisis – is finally declining, Central Europe expanded by 3.5 percent, the highest re- but remains high in Croatia, Slovenia and Southern Europe. gional rate. Southern Europe’s growth rate, at 1.5 percent, Estimates suggest that the recovery has led to a small was the slowest, but was still a significant improvement decline in poverty in Bulgaria, Croatia Poland and Romania.
2 ry Investment remains the weak link to a more vigorous exports contributed positively to growth in the first half of recovery. Unlike the US, investment as a share of GDP is 2015 in all regions of the EU except Southern Europe, as the m m a u s
not yet trending upwards across the EU. Investment by Euro depreciated. After years of consolidation, the fiscal e iv firms remains weak despite increasing confidence and policy stance across the EU has become broadly neutral as t u
favorable financial conditions supported by the ECB’s fiscal deficits in 15 out of 28 EU member states fell to below e c x Quantitative Easing (QE). Despite declining world trade 3 percent of GDP. e and weakening import demand from China and Russia, net
The recovery is expected to gain strength over the and labor markets continue to improve. However, growth medium term, fueled by private consumption but is projected to remain below pre-crisis levels as investment investment is likely to be constrained by structural remains subdued as private and public sector deleveraging rigidities. Private consumption is expected to continue continues. The output gap is projected to close slowly over to support the expansion, as inflation remains subdued the medium-term.
The EU needs to turn current tailwinds into self- increase the coverage of the poorest and most vulnerable sustaining growth through continued structural groups, while ensuring that spending is efficient and reform. Countries need to continue to remove con- affordable over the long-term. Well-designed social as- straints on businesses by reducing rigidities in labor and sistance systems also facilitate labor market activation of product markets and ensuring labor has the right skills poor and vulnerable groups, supporting poverty reduction through investing in education and training. In this con- and long-term growth. text, social assistance systems also need to continue to
Significant risks to a more robust recovery remain. growth and higher financial volatility could all exacerbate The crisis has left a legacy of high public and private-sector these vulnerabilities and undermine the current outlook. debt. A prolonged period of low investment growth and Moreover, regional tensions could undermine confidence below-target inflation, a slowdown in emerging-market in the recovery.
3 c h a p t e r o n e
R E C EN T ECONOMIC DEVELOPMENTS
06 AFTER A PROLONGED CRISIS THAT LED TO AN INCREASE IN POVERTY…
10 …THE RECOVERY IS GAINING STRENGTH, FUELED BY PRIVATE CONSUMPTION AND SUPPORTED BY LOWER OIL PRICES, A WEAKER EURO AND THE ECB’S QE
13 LABOR MARKETS ARE IMPROVING
17 FISCAL CONSOLIDATION IS SLOWING
19 COUNTRIES CONTINUE TO IMPROVE BUSINESS REGULATIONS IN AN EFFORT TO BOLSTER GROWTH t r o p e r
c i After a prolonged crisis e c o n o m
r l a
u that led to an increase e g r
u
e in poverty…
The 2008-09 global financial crisis hit the EU hard, went through an exceptionally steep and sustained eco- leading to an increase in poverty in many EU coun- nomic downturn, suffered from a very large increase in tries.1 As the EU endured two contractions between poverty which in 2012 exceeded poverty in all EU coun- 2008 and 2012, poverty, as measured by the share of the tries.2 In contrast, some Central European countries, such population with an income of less than 60 percent of the as Poland and the Slovak Republic, achieved significant and 2008 median income, increased in most EU countries sustained declines in poverty during the same period fig. 1. and, particularly, in Southern European. Greece, which
Q fig. 1 The crisis led to a significant increase in poverty in several EU countries Poverty anchored at 60 percent of median income in 2008 in adult equivalent terms
60
50
40
30
20
10
0 AT BE FR DE IE LU NL UK EL IT PT ES BG CZ HU PL RO SK SI DK FI SE EE LV LT
West South Central North
2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: World Bank estimates using EU-SILC. Data for Croatia prior to 2010 is not available. / Note: Incomes have been measured in USD 2011 PPP terms. Income year 2012 is the latest year for which survey data is available.
1 The EU typically uses a relative poverty line set at 60 percent of median adult equivalent income. In order to compare poverty over time, we anchor this poverty line at the 2008 value. For EU targets see: http://ec.europa.eu/social/ 2 In 2012, poverty in Greece – measured by an absolute poverty line of USD5 in PPP terms – exceeded poverty in several Central European countries, including Hungary, Poland, Slovenia and Slovak Republic
6 m e n t s p e lo v d e
c i e c o n o m
e c e n t r
Young people and children were particularly affected where poverty increased substantially more following by the poverty increase. In 2012, poverty rates were the the crisis, particularly for children and young people (see highest for individuals aged 15-24, followed by those Box 1) fig. 2B. Poverty among the elderly declined on aver- under 15 fig. 2A. This was especially true in Southern Europe, age in all regions, except in Southern Europe.
Q fig. 2 Young and less skilled people were most affected by the increase in poverty Poverty anchored to 60 percent of median income in 2008 in adult equivalent terms. A. Poverty by Age in 2012 B. Change in Poverty by Age, 2008-2012
45 20
40
15
35
30 10
25
5 20
15 0
10
-5 5
0 -10 West South Central North West South Central North
Ages 0-14 Ages 15-24 Ages 25-54 Ages 0-14 Ages 15-24 Ages 25-54
Ages 55-64 Ages 65+ Ages 55-64 Ages 65+
Source: World Bank estimates using EU-SILC. Note: Incomes have been measured in USD 2011 PPP terms.
7 8 e u r e g u l a r e c o n o m i c r e p o r t
Index (2004=100) Q an even steeper decline in household incomes. incomes. household in decline even steeper an into translated that downturn long economic and Greece has sufferedfroman exceptionally steep percent. percent. 40 bottom of the incomes in decline steep relatively the explain pensions and employment in Changes ayear 10 percent or percent, 37 fell capita per income household period, this During years. in recent any of EU country decline economic largest the far by average- on year per percent 5.7 or percent, 21 by plummeted capita per GDP 2012, real and 2008 Between Third, patterns in social protection spending insulated spending protection in social Third, patterns lower-skilled of share large arelatively workers. employ that sectors in particularly 2008, after significantly fell earnings labor Second, in less-skilled 2013. the for percent 29.8 and young the for percent 58.3 at peaking doubled, unemployment 2008: their after unemployment rates in increase by the affected most the were They incomes. low relatively with population of the share a significant 100 120 40 60 80 20 A. Household incomeA. and GDP fig 0 Source: Source: . 3 House 2004 Real GDP per capita from Eurostat; EU-SILC UDB surveys 2009-2013. surveys UDB EU-SILC Eurostat; from capita per GDP Real 2005 First, young and less-skilled people constitute constitute people less-skilled and young First, h 2006 h income old 2007 Real householdincomepercapita Real GDPpercapita 2008 2009 BOX 1. POVERTY TRENDS IN GREECE IN TRENDS BOX POVERTY 1. t more decreased as 2010 2011 fig . 3A 2012 . As a result, aresult, . As 2013 2014 h G in GDP an
(see Focus Note)(see Focus into poverty falling from them in protecting role limited and covered fewlow-income households, thus playing a – distribution income the of percent 40 bottom the of income of 5percent than less small,for accounting were transfers social time, same Atthe increased. –barely crisis the of onset the at low relatively was –which elderly the among poverty aresult, As them. with lived who relatives the and pensioners up to 2012, protecting little relatively middle-income Pension households. incomes declined the bottom 40 percent fell by 43.1 percent 43.1 by percent fell percent 40 bottom the of income the percent, 37 by dropped incomes average While most. the suffered distribution income the of end low the at Greeks to period. 45.9 same the over percent an income median the of percent 60 below income an Change in income per capita (%) with population the of share the by measured poverty, -80 -70 -60 -50 -40 -30 B. Growth Incidence Curve, 2009-2012 B. Growth chored in 2008, more than doubled from 19.7 from than doubled more percent in 2008, chored 1 reece 21 . Percentiles 41 61 fig 81 . 3B . A decline in labor incomes, employment and in some by 6.8 percentage points between 2008 and 2011. Cuts in cases government transfers contributed to the rise employment added an additional 5 percentage points. In m e n t s in poverty. Labor income makes up the largest share of Slovenia, declining labor incomes and employment contrib- p e lo
gross household income in EU countries, ranging from 55 uted a total of 3.9 percentage points to the increase in the v
fig. 4 d e percent in Ireland to 67.7 percent in Poland in 2012. Labor poverty rate . By contrast, Poland saw its poverty rate c income declined significantly during the crisis, particularly decline as a real GDP growth of about 3.4 percent led to an in- i among those in the bottom 40 percent of the income crease in labor income. Cuts in social assistance contributed to 3 distribution. This decline increased Greece’s poverty rate a rise in poverty in many EU countries (see also Focus Note). e c o n o m
e c e n t Q fig. 4 The decline in labor income and employment contributed most to the poverty increase r Contribution to change in poverty per capita between 2008 and 2011 in percentage points
20 15 10 5 0 -5 -10
AT BE FR LU NL UK EL ES IT BG CZ HU PL RO SI DE EE FI LV LT
West South Central North
Share of income net of taxes Share of adults Share employed Labor income per employed adult Pensions Social Assistance Other Total
Source: World Bank estimates using EU-SILC panel date. Data for Croatia is not available. Note: Poverty anchored at 60 percent of the median income in 2008, measured in USD2011PPP.
Poverty estimates for 2014 and 2015 for some Central with a focus on those factors that are most likely to affect European countries suggest that the EU recovery is the evolution of poverty across the EU, such as household likely to alleviate poverty in many countries. In fact, income, labor market development and social assistance poverty in Bulgaria, Poland and Romania has likely declined spending. The focus note will discuss how well-designed in 2014 and 2015 (see Spotlight on Central Europe). The social protections systems across the EU are for protecting next section will look at recent economic developments the poor.
3 The labor income of the bottom 20 percent also declined steeply in Southern Europe, particularly in Spain and Greece, but increased in some EU member states, including in the Netherlands, the UK, Poland, and the Czech Republic.
9 10 e u r e g u l a r e c o n o m i c r e p o r t the first half of 2014half first the in (y-o-y)percent percent from 1.3 of 2015 half first in the Portugal. The Central Europe experienced the highest real real highest the Europe experienced Central The Portugal. extent to alesser and in Spain growth stronger by driven largely of 2015, half first in the percent of 2014half to 1.5 first 0.1 from in the increased percent growth GDP real where Europe, in Southern particularly but in all regions, root remains but strength gaining is recovery EUgrowth The
-0,5 Q 0,5 2,5 3,5 1,5 -1 4 0 2 3 1 National Accounts Mainfor Aggregates the European Union Source: (in points, not seasonally percentage adjusted) A. fig Year-on-year chain-linked volume GDP growth H1 2014 . 5 G EU28 Eurostat; World Bank calculations. Note: moderate. moderate. Change ininventories Private consumption ro by lower oil prices, aweaker
H1 2015 supported and consumption w strength, fueledstrength, by private t h
H1 2014 ...the recovery isgaining West pic as Euro the and ECB’s QE FIG. 5A
H1 2015 to quickened 1.8 growth GDP Real . The recovery has taken a firmer afirmer taken has recovery . The k Net exports Public consumption f regions all across pace up ed H1 2014 South
H1 2015 Contributions are calculated based on the Eurostat described methodology in Compiling Annual and Quarterly
Central H1 2014 Real GDPgrowth Fixed investment H1 2015
H1 2014 North
H1 2015 by consumption ueled
-2 of expansion. expansion. of pace global the half and percent 2.2 of average OECD the below remained growth notwithstanding, acceleration economic year’s This Finland. and Estonia in Greece, tions by 1.9 of rate an annual to at grow contrac despite percent, EU the continuing with 2015, of third in the quarter strong remained growth that indicated estimates Romania. Flash and Poland Republic, Czech in the outturn growth a solid by driven percent 3.5 at of 2015 half first in the growth GDP -1 4 0 6 2 3 5 1 in the EU 28 (in percentage points, seasonally adjusted) seasonally points, (in percentage 28 EU the in B. Contributions to in growth nominal disposable income 2013Q1
2013Q2 Adjusted grossdisposableincome Wages Gross operatingsurplusandmixedincome Net propertyincomeandothercurrenttransfers Social benefits Social transfersinkind Taxes
2013Q3
2013Q4
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2 - The recovery has largely been fueled by private con- in labor markets, which led to higher wages and employ-
sumption as household disposable incomes increased ment. Higher earnings of the self-employed as well as m e n t s p due to a rebound in labor markets and lower oil prices. property incomes also supported household income e lo Growth in private consumption contributed 1.2 percentage growth.4 Contributions from social transfers in kind and v d e
FIG. 5B
points to real GDP growth in H1 2015 and accelerated in all social benefits remained broadly constant . Real dis- c i four regions FIG. 5A. In fact, private consumption growth posable income grew even stronger as consumer price significantly outpaced real GDP growth in the first two inflation remained below zero throughout the first quarter e c o n o m quarters of 2015. Nominal disposable household incomes of 2015 and turned negative again in September 2015 due increased by 5 percent (y-o-y) in H1 2015, driven by a rebound to falling energy prices5 as oil prices reached a multi-year low. e c e n t r
The Euro depreciated strongly, supporting net export the EU accelerated despite declining world trade and growth. The Euro depreciated by over 10 percent in real weakening import demand from China and Russia and net effective terms between August 2014 and March 2015, exports contributed positively to growth. The EU current before appreciating by 3.7 percent between March and account surplus reached a historical high of 2.2 percent of September 2015. As a result, extra-EU export growth across GDP in June 2015.
QE has helped the recovery by increasing confidence Q fig. 6 Confidence is improving and easing financial conditions. After reducing policy Economic sentiment indicator long-run average=100 rates to near zero in the wake of the global financial crisis, the ECB started to implement its quantitative easing policy in March 2015. In the six months through September 2015, the ECB purchased securities issued by Euro-area member states and selected institutions that amounted to €343.3 billion6, as most economic confidence indicators have juil.-15 gradually improved. The overall economic sentiment for juil.-13 oct.-15 oct.-13 avr.-15 avr.-13 juil.-14 oct.-14 avr.-14 janv.-15 janv.-13 janv.-14 FIG. 6 the EU remains above its long-run average . Construction confidence indicator Retail confidence indicator Consumer confidence indicator Services confidence indicator Industrial confidence indicator Economic sentiment indicator (right) Source: Eurostat
4 The Central Europe was the only region that saw household incomes decline in Q2 2015, as wage growth and net property incomes slowed down. 5 Consumer price inflation peaked at 0.3 percent in May 2015 Core inflation increased slightly to 1 percent in October 2015 as a result of the pass-through of the Euro’s depreciation and the continued recovery in domestic demand. 6 Under its expanded asset purchase program (EAPP or “QE”), which comprises the “covered bond purchase program” (CBPP3), the “asset-backed securities purchase program” (ABSPP) and the “public sector purchase program” (PSPP), the ECB buys around €60 billion a month (currently planned to last until September 2015).
11 t declined in every country in the euro area, with the cost of
r Despite accommodative monetary policy and fa- o
p vorable financial conditions, investment remains borrowing ranging from 1.6 percent in France to 4.8 percent e
r 7 in Greece, as of July 2015. The average interest rate
c subdued as investors remain concerned about the i strength of the recovery, and households and corpo- charged on new mortgages has also declined in all Euro rations continued to deleverage. Despite accommodative area countries, except in Ireland, with the cost of borrow- e c o n o m
monetary policy and favorable financial conditions, invest- ing ranging from 1.4 percent in Finland to 3.3 percent in r
l a ment remains subdued as investors remain concerned Cyprus. The Euro area bank lending survey Q3 2013 (ECB u about the strength of the recovery, and households and 2015a) confirms that the interest rate level was an important e g r corporations continued to deleverage. Rising confidence factor in the increase in credit demand for households and u e and favorable financial conditions have led to an increase enterprises within the EU. Credit growth was highest in in asset prices, contributing to improvements in private Central Europe, closely followed by Western Europe, but sector balance sheets. In fact, the net financial wealth of remained subdued in Southern Europe, though underlying households and non-financial corporations in the Euro demand and supply factors differed across countries.8 area has started to exceed pre-crisis levels. The cost of bor- Despite improvement in private sector balance sheets and rowing for both households and corporations has reached favorable financial conditions, investment growth remains historic lows in both nominal and real terms, supporting sluggish in the EU and is not yet trending upwards as a share credit demand FIG. 7A & 7B, respectively. For enterprises, the of GDP. Investment by firms remains weak (see also FIG. 8D ). average interest rate charged on new bank loans has
Q fig. 7 The cost of borrowing for enterprises and house purchases has reached a historic low Annualized Agreed Interest Rate on new loans in percent B. House purchases A. Enterprises
7 5 min. of Jan-05 thru Jul-14 4,5 min. of Jan-05 thru Jul-14 6 juil-14 4 juil-14 juil-15 5 juil-15 3,5 4 3 2,5 3 2 2 1,5 1 1 0,5 0 0 FI SI IE IT FI SI IE EL ES IT FR EE SK PT LV NL CY DE EL ES AT FR EE SK PT LV NL CY DE AT EA19 EA19 Source: European Central Bank. / Note: The rate is the average Annualized Agreed Interest Rate / Narrowly Defined Effective Rate charged on new loans during the period
7 Not only has the cost of bank loans declined, but corporate bond spreads have also reached historically low levels. 8 While in Italy demand for credit picked up and supply conditions (credit standards and terms and conditions) eased, suggesting some signs of recovery, demand for credit and supply conditions remained unchanged in Spain.
12 m e n t s p e lo v d e
Labor markets c are improving i e c o n o m
e c e n t r
Despite the prolonged crisis, the EU has lost fewer participation rates in Q2 2015 are higher than at the begin- jobs than the US since 2007. In 2007, the employment ning of 2008 in most European countries, even in those rate9 was 63 percent in the US and 53.1 percent in the EU. In with still high unemployment rates10. Second, Europe has 2014, the US rate was still 4 percentage points below its relied more on reducing hours worked per job than on level in 2007, but only 1.4 percentage points lower in the EU shedding jobs. With trends in unit labor costs similar be- FIG. 8.A. There are two main reasons for employment declining tween the US and Europe FIG. 8B, but differing job losses, less in the EU. First, labor force participation declined total employment compensation of firms in Europe seems steeply in the US after the crisis. By contrast, labor force to have been less reactive to the crisis and may have con- participation rates increased consistently in the EU28 as tributed to divergent trends in the operating surplus of previously inactive groups, in particular elderly workers firms and investment FIG 8C & D. and women, joined the labor market. In fact, labor force
Q fig. 8 The EU has lost fewer jobs than the US but firms perform worse A. Employment rate B. Unit labor cost (percent of population aged 15+, rebased 2007=100) (deflated by CPI, rebased 2007=100) 101 102
100 100 99
98 98
97 96 96
95 94
94 92 2011 2013 2012 2010 2014 2007 2008 2009 2011 2013 2012 2010 2014 2007 2008 2009 US EU28 US EU28 US (adjusted by hours worked) EU28 (adjusted by hours worked)
Source: OECD.
9 Employment rate denotes the number of employed relative to the working-age population. 10 Portugal is one of the few countries were labor force participation in Q2 2015 was slightly lower than at the beginning of 2008.
13 t C. Non-financial corporations operating surplus D. Non-financial corporations fixed investment r
o (share of GDP, rebased 2007=100) (share of GDP, rebased 2007=100) p e
r 102 100,5
c i
100 101
e c o n o m 99,5 100 r
l a 99 u 99 e g r
98,5 u e 98 98 2011 2013 2012 2010 2014 2007 2008 2009 2011 2013 2012 2010 2014 2007 2008 US (operating surplus and mixed income) 2009 EU28 (operating surplus and mixed income) US EU28 US (compensation of employees) EU28 (compensation of employees)
Source: OECD.
Wages are on the rise and unemployment is declining educated (European Commission 2015b).11 Given the impor- in most EU countries. Wages have been increasing in all tance of labor income for poverty reduction, these labor sub-regions during the last three quarters. Unemployment market patterns suggest that poverty is again declining in fell in all regions, responding very strongly to the moder- most EU countries. Moreover, there were around 2 million ate recovery, and reached 2007-08 levels in Germany, unfilled vacancies in the EU in June 2015, which compares Czech Republic, United Kingdom, Malta, Hungary and to 23 million unemployed. Filling these vacancies by enhanc- Poland FIG. 9. The biggest gaps in unemployment remain in ing labor mobility within the EU could further improve Southern Europe (Box 2) and Croatia. Unemployment fell living standards. for all education groups, but on average less for the less
Q fig. 9 Unemployment rates are reaching pre-crisis levels in many EU countries, except in the South Seasonally adjusted unemployment rate
30
25
20
15
10
5
0 EL ES HR CY PT IT SK FR BG IE LV LT SI FI BE PL SE HU NL RO DK EE LU AT MT UK CZ DE US
2007-08 Q1/Q2 2015
Source: Eurostat; World Bank calculations.
11 Long-term unemployment showed some timid signs of decline, falling from an EU-wide average of 5.1 percent in Q2 2014 to 4.7 percent in Q2 2015, but it remained high com- pared to 2.8 percent in 2008. Long-term unemployment rates were particularly high in Greece (18.2 percent), Spain (11.8 percent), and Croatia (9.8 percent) as of Q2 2015.
14
the highest in Western Europe and, initially, and, Europe in in Western smallest the highest the average on is shock growth GDP real negative one-percent Europe. Southern in employment on impact term longer negative have alarger to appear shocks Growth 2/ 1/ Q 0,004 0,006 0,008 0,002 0,014 0,012
bility. In fact, Western European countries have lower have lower countries European Western bility. In fact, market flexi labor low with in countries persistent more is response unemployment while the flexibility market labor high with in countries strong is unemployment regions. across difference this explain may factors Several market institutions suggests that the initial response of that the initial response suggests market institutions 0,01
deals successfully with the Hurwicz-type bias associated to the use of fixed effects in a dynamic panel framework. panel dynamic ina effects fixed of use the to associated bias methodology This GMM. Hurwicz-type the system with by estimated successfully deals coefficients and instruments as used are regressors Lagged regressors. lagged and variables orthogonality the transformed preserves between and country-quarter, each for available observations future the all of mean the i.e. mean, forward the only Bover,1995). and removes (Arellano procedure This procedure’ ‘Helmert the using 2015 Q2 to 1999 Q1 from data quarterly and effects fixed country with VAR apanel on based are Estimates Source: Global Competitiveness Report 2014-2015 and Doing Business 2015. 2015. Business Doing and 2014-2015 Report Competitiveness Global Source: rate unemployment in Change A. Source: Source: fig 0 BOX U 2. 0 Th . 10 1 World Bank staff simulations.
Estimates show that the initial response to a initial the response that show Estimates 2 Theoretical and empirical literature on labor labor on literature empirical and Theoretical GDP gro aGDP to response unemployment e cumulative 3 4 ad nemployment 5 6 7 8 9 10 11 (in percentage points) (in percentage 12 13 14 15 16 West North Central South 17 j 18 aGDP to ustment s 19 20 - 0,04
unemployment, see Blanchard and 1987) Summers, in (the hysteresis ashock so called after increase may rate equilibrium unemployment the firms, and insiders between bargaining by set were wages if that argued tively, been has it costs. redundancy and practices, firing and hiring flexibility: markets oflabor key measures to two according states, European Southern than market rigidities labor in Western Europe. in Western than in Southern higher percent 50 was shock growth GDP negative ofa given (20 quarters), effect cumulative the 5years after Infact, in unemployment. increase persistent Y Europe. Southern 0,06 0,09 0,08 0,02 0,07 0,05 0,03 0,01 0 B. Cumulative change in unemployment rate unemployment in change Cumulative B. 0 1 w t 2 h s 3 h 4 oc 5 S in largest k is 1/ et, Southern Europe showed the most most the showed Europe Southern et, 6 7 h 8 oc 9 West 10 E k in 11 out 12 South 13 h 14 E ern urope 15 Central 16 urope 2/ 17 .
Alterna 18 North 19 20 - 15 r e c e n t e c o n o m i c d e v e lo p m e n t s 16 e u r e g u l a r e c o n o m i c r e p o r t Q soared soared states EU member in several unemployment as crisis financial global wake in the 2008 the of groups all age among policy initiatives, such as the the such as initiatives, policy EU-wide by supported been has unemployment youth enough. enough. not is alone recovery the that suggesting inactivity, levels of high with along countries some in high very but remains declining Youth also is unemployment Ireland, Latvia, Lithuania and Spain Spain and Lithuania Latvia, Ireland, in particular, and EU countries Estonia, in Croatia, most in rapidly to decline started has unemployment youth fact, In in arecovery. be hired to first also and hits, acrisis once -10 Change in youth unemployment rate Source: rates 2008-2012 (in percentage points) A. Seasonally adjusted unemployment rate median income as of 2008, measured in US$2011 PPP terms. PPP US$2011 in measured 2008, of as income median fig Change in youth and poverty youth unemployment Y . 11 -5 FI FIG. 11A Eurostat; World Bank staff calculations. /Note: calculations. staff Bank World Eurostat; 40 20 30 10 PL 25 35 Europe’s youth faced the steepest surge in poverty in surge poverty steepest the Europe’s faced youth -5 AT 15 0 5 SE out 0 CZ SK FR BE . Y UK LU h unemployment oung people are often the first to be fired be fired to first the often are people oung NL 5 BG DK EE LT IT HU 10 PT SI LV Change inyouthpovertyrate RO 15 IE ES 20 Y outh Guarantee schemes schemes Guarantee outh is declining 25 FIG. 11B 30 Y . The decline in decline . The outh poverty is calculated as the percentage of young people with an income below the 60 percent percent 60 the below income an with people young of percentage the as calculated is poverty outh 35 in most EL 40 EU countries 45 Changes intotalunemploymentrate
-6 and enable them to acquire marketable skills. to acquiremarketable them enable and training and education in formal people young retaining on focus that countries in high NEET strategies sound of implementation the in 2012, requiring percent of 13.2 into 2014, apeak percent compared 12.5 high at stubbornly (NEET) training or remains employment in education, neither people young of rate the in manycountries rapidly ing fall is Moreover, unemployment youth Slovakia. and while Cyprus, Italy, Croatia, Portugal, Spain, high in Greece, very Y systems. education and training vocational as well as people young for services employment in public improvements other with along Q2 2013 – Q2 2015 (in percentage points) (in percentage 2015 –Q2 2013 Q2 B. Change in youth and total unemployment rates -5 PT IE -4 ES HU -3 BG PL et, youth unemployment remains remains unemployment youth et, SK EL LT UK -2 CZ LV EE HR SI MT -1 LU CY DK RO DE SE -10 -12 -4 -6 -8 -2 4 NL 0 2 0 unemployment rate Changes inyouth IT BE FR AT 1
FI 2 - the 3 percent limit but 9 are currently in an excess deficit deficit in excess an currently 9are but limit 3percent the below deficits have countries 28 the of (15out since 2008 time first the for percent 3 below now is deficit average The and Southern Europe. Europe. Southern and declined spendingassistance actually in the Central social crisis, the during benefits social total in crease in an EU witnessed the across countries most While stance. policy fiscal implement a neutral more to seek EU countries many as consolidation fiscal slowed have Governments and, in some EU countries, a declining GDP. adeclining EU countries, in some and, assis Social crisis of in times adjusted be lar, easily cannot that pensions in particu spending, protection social contribution-based in trend an by upward driven extent to asignificant was Y crisis. EUthe the during across increased of 9.7 percent of GDP in 2010 to 2.7 percent in 2014 9.7of percent in 2010 to 2.7 GDP of percent peak a from sharply deficits fiscal reduced have countries 10 -5 15 Q 0 5 Source: A. A. Contribution to fiscalreduction, deficit 2010-2014,percent GDP of fig Structural versus cyclical adjustment S . 12
EU28
EU Ameco; World Bank calculations. Structural ficantigni West
fiscal Cyclical/one-off Saddled with high public debt, EU debt, high public with Saddled Social benefits in percent of GDP GDP of percent in benefits Social Fiscal consolidation consolidation Fiscal South ad
j ustment Central
Deficit change et, this increase increase this et, h is slowing is as been North FIG. 12A
ac h - - - . ieved
increase in poverty. increase so Note) (see Focus systems protection focused largely on revenue increases increases revenue on largely focused Europe Southern in the countries while ture reduction expendi on more relied countries European Central and The Western EU countries. among differences considerable masks years during the last adjustment fiscal substantial The of 2015. half first in the measures) little fiscal changed one-off for and cycle economic the for (the adjusted latter deficits procedure). structural the and headline the Both sion and disability systems and different types of social of types different and systems disability sion and to pen reforms with associated considerations economy political sensitive reflecting 2012 interms, real and 2008 between Europe Southern and in Central countries most in declined actually individuals, and families vulnerable to support designed primarily is which spending, tance 10 -2 12 4 0 6 8 2 t B. B. cial assistance benefits has likely contributed to an likely contributed has benefits cial assistance h roug Revenue versus expenditure adjustment
EU28 hff di Rev erent West
Exp approac South Reduction indeficit
h es
FIG.12B Central . This decline in decline This .
. North
- - 17 r e c e n t e c o n o m i c d e v e lo p m e n t s 18 e u r e g u l a r e c o n o m i c r e p o r t use discretionary fiscal policy to boost growth. boost to policy fiscal discretionary use to ability their limiting levels of debt, public highest the have to continue gaps output largest the with Countries pace The declines. GDP,output by large significantly driven of 120percent above well now is level its and GDP of points percentage 30 by increased Europe Southern in the debt particular, In public countries. between variations nificant sig were there similar US, toin the that very EUthe was in 2010-2015 in indebtedness increase overall the in While Europe. Southern in OECD, the particularly in highest the among are and elevated levels debt remain public years, recent in deficits fiscal in reductions Despite gaps are the largest and poverty increases were the steep the were increases poverty and largest are the gaps output where Europe, in Southern particularly countries, inmany constrained is therefore stimulus fiscal for scope The The - - growth and low inflation. low and growth slow rate movements, interest from costs increased to exposure their long-term, the over heightens and policy fiscal to relax ability governments’ tocontinue constrain will overhang debt significant the Nonetheless, growth. economic higher and many of countries positions fiscal better reflecting of 2015, quarter first in the flattened and in 2014, markedly EU in the accumulation slowed debt of reduce debts to more manageable levels. manageable to more debts reduce and growth to boost in order activity private-sector ster to bol reforms implement and systems, protection social of including spending, public of efficiency to the improve to continue but options few leaves this Europe, Southern in of much recovery modest the with Combined est. - worst scores vary significantly significantly vary scores worst (World 2015b) Bank Ranking Business Doing Bank’s World the of top 50 the in rank Greece, and Luxembourg Malta, for except tries, environment reforms doing business were EU member states EU member were business doing of ease of in terms third top 20 countries the of one 2015, takes on average 590 days in the EU to enforce contracts, EU incontracts, the to 590enforce days average on takes 13 12 potential. EU’s the growth long-term strengthen to reforms for further room ample is there Business, of Doing terms in high rank EU countries Though slowed. has implementation of reform pace the recovery.Yet, growth the have supported Europe, tral Cen and Southern in particular in reforms, Structural Greece, respectively and Italy Spain, Portugal, in 4-9percent by sectors affected in productivity labor boosted have Directives Services
mark, Lithuania). Similar to the Southern Europe, but to a lesser extent, the Western Europe made broad-based improvements, notably in starting a business, protecting mi taxes. protecting paying and abusiness, investors starting in nority notably improvements, broad-based made Europe Western the extent, alesser to (Den but Europe, procedures Southern online the to more Similar Lithuania). introducing or mark, Sweden) (Estonia, formalities registration and pre-registration Euro simplifying by Northern abusiness start to contrast, In easier it Europe. made Central the in countries pean improvement of areas significant were taxes and insolvency on Regulations electricity. investor getting and minority taxes paying contracts, enforcing protection, for administration and regulations their improved countries European Southern (2015) Business Doing Bank’s World the to According dom (sixth) and Sweden (eighth). King Sweden and United (sixth) (third), dom Denmark were 2015 in states member EU top-ranked The seventh. remained US the and ranking, the of top the at remained Zealand New and Singapore regulations effort to an in . Y et, differences between the best and and best the between differences et, 12 (Varga, Werner and t’Vled 2013) t’Vled and (Varga, Werner Countries continue to continue Countries and the implementation of the EC’s ofthe implementation the and improve business business improve FIG. 13A bolster growth bolster . For example, it still still it example, .For 13 and all EU and coun Business Business In - - . reform implementation has recently slowed (ECB slowed 2015b) recently has implementation reform of pace the performance, export and productivity boost 2013 have helped and 2008 between reforms structural 3 ) Box (World 2015a, Bank services these use that sectors services and manufacturing in the firms of productivity factor total boosted significantly sector services in the De-regulation reforms might help to boost countries competitiveness. competitiveness. countries to boost help might reforms EU,where the and within perform countries how highlights Table Finland. and Ireland Estonia, in Luxembourg, 1 hours to 96 compared to taxes, compile Republic Czech the and tation of reforms within a country ( acountry within reforms of tation implemen the at looking increasingly also are Countries in Bulgaria hours than 400 more takes It Slovenia. and Croatia EU within 23 days. Y days. 23 EU within in the average on issued is license Aconstruction Sweden. and Luxembourg in Lithuania, ayear than to less compared . Y et, despite empirical evidence that the impact of of impact the that evidence empirical despite et, et, it takes more than 50 days in Belgium, in Belgium, days 50 than more takes it et, see Box 4 Box see
).
- - - . - -
19 r e c e n t e c o n o m i c d e v e lo p m e n t s 20 e u r e g u l a r e c o n o m i c r e p o r t 100
Q Q Source: SLOVAK REPUBLIC UNITED KINGDOM CZECH REPUBLIC NETHERLANDS LUXEMBOURG LITHUANIA PORTUGAL DENMARK GERMANY BULGARIA SLOVENIA HUNGARY ROMANIA CROATIA BELGIUM FINLAND ESTONIA AUSTRIA IRELAND SWEDEN POLAND FRANCE CYPRUS GREECE LATVIA MALTA SPAIN ITALY 60 90 80 70 50 65 95 85 75 55 table Source: Doing Business Scores and Distance to Frontier (100 = best practice) =best (100 A. performance. Colors rangeperformance. from green (strong performance) to yellow (average performance) and red (low performance). fig Overall ease of doing business, distance to frontier frontier to distance business, doing of ease Overall D . 13 Doing Business 2016 database. /Note: database. 2016 Business Doing EU28
World Bank Doing Business. Doing Bank World 1 EASE O EASE i ff t in erences
A BUSINESS STARTING DOING BUSINESS RAN BUSINESS F DOING West 20 24 26 28 22 27 10 14 25 23 19 16 18 21 12 17 15 13 11 4 6 9 8 2 7 5 3 1
h DEALING WITH
t in environment e business LICENSES South 20 24 26 28 22 27 10 14 25 23 16 19 18 21 12 17 15 13 11 4 6 9 8 2 7 5 3 1
The intensity of the color reflects the rank (out of 28) of a country for an indicator. The lower the number, the better the the better the number, the lower The indicator. an for country 28)of a of rank (out the reflects color the of intensity The ELECTRICITY
K GETTING INGS IN T IN INGS Central
20 24 26 28 22 27 10 14 25 23 16 19 18 21 12 17 15 13 11 4 9 6 8 2 7 5 3 1
Max. score Min. score Average score REGISTERING H PROPERTY E EU
20 24 26 28 22 27 10 14 25 23 16 19 18 21 12 17 15 13 11 4 9 6 8 2 7 5 3 1
North h EU vary signi e EU
GETTING CREDIT 20 20 20 26 28 27 23 23 23 16 16 18 18 13 13 13 6 6 6 6 6 6 6 2 2 2 2 1
4 0 2 3 5 1 country grouping B. Contribution to change in doing business scores by scores business doing in change to Contribution PROTECTING
INVESTORS Starting a business MINORITY f w icantly 20 24 24 26 28 22 27 14 23 16 19 18 12 21 17 15 13 11 9 9 6 8 2 7 3 5 3 1
Dealing with West construction
Getting electricity PAYING it TAXES
h 24 20 26 28 22 27 10 14 25 23 19 16 18 12 21 17 15 13 11 4 9 6 8 2 7 5 3 1
South Registering time over and regions across and in property
TRADING BORDERS Getting credit ACROSS 20 24 26 28 22 27 25 14 23 19 16 18 21 17 15 13 1 1 1 1 1 1 1 1 1 1 1 1
Minority investors Central protection CONTRACTS ENFORCING Paying taxes
24 20 26 28 22 27 14 10 25 23 16 19 18 21 12 17 13 15 11 4 9 6 8 2 7 5 3 1
Trading across
borders North
INSOLVENCY RESOLVING Enforcing contracts 20 24 26 28 22 27 10 25 14 23 16 19 18 21 12 17 13 15 11 4 9 6 8 2 7 5 3 1
Resolving insolvency 14 EU recovery. the strengthen could reforms market product and market Labor to support long-term growth. These include strengthening strengthening include These long-term growth. to support essential be will market reforms product Continued tant. impor remains skills marketable and education general inhighquality Moreover,investment continued a important. be would market rigidities labor reduce and states member EU across and within mobility labor enhance which forms tunities for growth. for growth. tunities op por unprecedented create can technology Digital in contracts exclusive or market segmentation to local due high rents enjoyed frequently has which industry, ism tour and hotel the on pressure competitive putting rents, short-term for homes their to let in 2014, owners enabling countries 40 than in more operated example, for Airbnb, advertising. and publishing media, tourism, logistics, finance, transport, trade, retail such as tional services, tradi offer but web the on entirely model business their base that startups of types new created has internet The innovation. and competition from protected most sectors in opposition severe faces but that growth, for opportunities significant create that technology now on digital rely providers Service com enhance can which services, ridesharing of duction intro the after only to decline started They of 2013. ning $1,100,000 than begin toin the more in 2004 $400,000 Y InNew owners. current from bought be must and rarely issued are since licenses costs high fixed with sociated as often market is the entering ataxi; to operate license a to hold drivers require world the around cities Many fight. vowed to drivers taxi local which Croatia, in arrived service aridesharing 2015, October In Source: tected from competition and innovation. Y innovation. and competition from tected pro most the typically are that in sectors largest are they
See EU Communication on upgrading the Single Market: http://europa.eu/rapid/press-release_IP-15-5909_en.htm Market: Single the upgrading on Communication EU See ork City, costs for taxi licenses skyrocketed from about about from skyrocketed licenses taxi for City,ork costs World Bank, World 2016 Development Report Dividends” “Digital (forthcoming) They are often missed because because missed areoften They BOX Digital 3. In particular, further re- In particular, further et, it is precisely precisely is it et, divide ------
investment, including for SMEs. for including investment, for resources private Juncker to Plan leverage so-called the through investment to boost measures complementary as well –as professions of deregulation the and mobility labor enhancing Union and Markets Capital the through fragmentation financial easing Directive, EUthe Services growth the most. growth consequently, and, productivity increase can technology digital that utilities, public or transport finance, trade, wholesale like and retail sectors protected in highly couriers. of apool with goods available locally of any type demanding customers matching by platforms e-commerce existing with also but FedEx such as providers service traditional with compete to started have and centers urban in U.S. services gistic lo local provide Parcel and Postmates up percent. to 90 by transfers currency of international prices the reducing by rents regulatory reduce startups two The requests. transfer currency reciprocal clearing by fees transaction indirect and direct saving online, transfers currency tional X startup U.S. the and TransferWise startup Estonian The countries. developing time. in real tracking vehicle and rating payment, online enabling applications smartphone joint developing such as services, ridesharing the with pete to com services customer their of quality the enhancing Y losses. income feared drivers taxi many that local wonder No 2014. 2012August and January between percent 65 fell use taxi companies, Francisco, of ridesharing birthplace the San In services. oftransport efficiency the and petition the EU’sthe Market Single or et, taxi companies in various cities responded by by responded cities in various companies taxi et, dividend 14 oom match requests for interna for match requests oom – notably by implementing fully fully by implementing – notably ? - - - 21 r e c e n t e c o n o m i c d e v e lo p m e n t s 22 e u r e g u l a r e c o n o m i c r e p o r t
indicators indicators Business in all Doing well 19and in Spain) equally does land, obtaining a construction permit in Opole takes four four takes in Opole permit aconstruction obtaining land, InPo in 12 Pamplona. but 7steps, only takes example, for lation and administration in line with global best best global with line in administration and lation regu of business cost and complexity the reducing have been Spain and level, Poland national At the nation. nation. coordi policy for greater need the level, suggesting subnational the at significantly varies ronment envi regulatory the Spain, and Poland in both In practices. anced as many regulations and administrative measures measures administrative and regulations many as anced nu more is picture country,the each within level local Business Doing Bank’s World the by measured as in many areas, practices good of frontier the toward closer moving companies, by faced burdens administrative and regulatory the in reducing progress able Spanishworst17— Q Spanish best10— Polishworst22— Source: Source: Polishbest19— fig L . 14 Doing Business 2015 data. 2015 Business Doing with constructionpermits No single city benchmarked (out benchmarked city single 18 in the Poland No of BOX Th 4. Procedures todeal (see Since 2008, both countries have made consid made have countries both 2008, Since di arge (number)
Fig . 14 ff — — — — — — — — 9UK — 7Sweden — — — — — — — — — 14Portugal — — 10Italy — 8France;Germany — — — )
. Starting a business in Seville, Spain, Spain, in Seville, abusiness . Starting wh on depend practices regulatory in erences 12.6 EUAvg. regulation business ofe importance local
t survey.However, the at h of P e case Spanish worst30.5— Polish worst42— Spanish best14— Polish best8— er Time tostarta ------S and oland
business (days) stitution. This is a particular problem for SMEs, who employ who SMEs, for problem aparticular is This stitution. in anational or municipality, the region the from comes arequirement whether irrelevant is view, of it neur’s point - From entrepre an companies. for burden regulatory the to reduce essential is institutions and government of levels different Coordinating authorities. local by determined are average, suggesting a large potential for inter-city for potential alarge learning. suggesting average, below- rank they where area one least all have at and area, gions obtained one least in at above-averagescore an indicator.one re- Spanish Similarly, two all but least at on average than better do cities all Polish Kielce, of ception ex the With months. than six Poznań Warsaw, and more Krakow, such as cities, in larger while months, ahalf and large share of net job creation in the EU. in the creation job net of share large a for are responsible and people of number a significant — — — 35Malta — — — 11Malta — 14.5Germany — — — 6UK — 5.5Italy — 2.5Portugal 11.6 EUAvg. SME ere pain t s locate All Poland0.15-0.3— Spanish worst10.1— Spanish best3.1— Cost toregisterproperty h business eir (% propertyvalue)
— 7.3Portugal — — 10.1Luxembourg — — — — 6.1France — — — — — — 0.3Switzerland 4.4 Italy; . :
4.5EUAvg. - -
There are many reasons that explain differences Spain grapple with higher costs. Spain’s average cost is between subnational regions. In Poland, variations more than twice that of the EU average for dealing with m e n t s often result from the local interpretation and implemen- construction permits, and 75% higher for getting electricity p e lo
tation of national laws. Spanish entrepreneurs face regula- and registering property. Poland typically has lower costs v d e tory complexity and red tape as they interact with three than the EU average. While Spain’s average cost to transfer c levels of government – national, regional and municipal property is nearly 8 percent of the property’s value, it’s i – each with its own competencies and legislation. While only 0.32 percent in Poland. Similarly, to deal with con-
entrepreneurs in both countries face regulatory complexity struction permits, entrepreneurs pay 5 percent of the e c o n o m and different levels of administrative efficiency, SMEs in warehouse value in Spain but only 0.22 percent in Poland. e c e n t r
Subnational Doing Business surveys thus provide ease of doing business across different locations within more information on how government might sup- the same country may thus help drive reform, since it is port good practices within a country and provides a difficult for local governments to justify why doing busi- tool for specific locations to share their experiences. ness in their city or province is more burdensome than in Because cities in the same country operate under a com- neighboring locations. Uneven performance can guide mon legal framework, the good practices of the best local policymakers to areas where improvements are performing cities can usually be replicated, although this possible, and these administrative improvements can may require support and shared experiences from more make a big difference in the life of an SME. successful jurisdictions. Sharing comparable data on the
Source: World Bank Subnational Doing Business.
23 c h a p t e r t wo
OUTLOOK
26 THE EU NEEDS TO TURN TAILWINDS INTO SUSTAINED GROWTH
28 MEDIUM-TER M RISKS ARE SUBSTANTIAL 26 e u r e g u l a r e c o n o m i c r e p o r t growth between regions regions between growth balanced more with to to strengthen continue set looks growth in 2015 and 2016. 2015 and in growth support to continue will consolidation fiscal from drag reduced and a prices lowcommodity confidence, improved conditions, financial of easing Continued
spending. public restrict to continue levels debt will high as neutral, broadly remain to expected is policy Fiscal Q Maastricht criteria of 3 percent of GDP in 2015. As the As in 2015. GDP of 3percent of criteria Maastricht formal the below be to expected deficits countries’ most with years, few past the over deficits fiscal lowered will continue to fuel growth as employment and wages grow. wages and employment as growth to continue fuel will consumption Greece, for outlook uncertain the China and in in activity moderation the in 2016. Despite percent 2.1 in 2015 and 2.0 at percent modest to remain expected 0,5 2,5 3,5 1,5 0 2 3 1 fig Source: A. Real GDP growth 2015-2016 growth GDP Real A. GR . 15 EU28 Eurostat, World Bank staff estimates and projections. and estimates staff Bank World Eurostat, 2,0 2,1 Governments across Europe have significantly significantly have Europe across Governments O 2014 W T H R H West ATES 2,0 2015 F 2,1
A R E fig turn tailwindsturn into PR . 15A South 2016 F The EU’s modest recovery recovery EU’s The modest O 1,4 sustained growth sustained J The EU needs to . Still, growth in the EU in the is . Still, growth ECTE 1,6 D D TO Central 3,3 RI SE 3,2
AC R OSS North 1,8
T 2,3 H E
E
U U T H B. subdued and corporate deleveraging continues. remain profits firm-level as likelyis sluggish to remain equipment and construction in non-residential investment of low. remain Growth rates mortgage and to rise continue prices house and incomes household disposable real as average likely on is to increase construction Residential subdued. to remain expected is growth investment risks, Y expected to moderate. moderate. to expected is growth economic overall on drag its and adjustment of pace The effort. consolidation the support to increasingly expected are financial conditions favorable and reforms structural further Europe, across strength gains recovery improves and financial conditions remain favorable favorable remain financial and conditions improves to pick up in 2016 confidence as projected is Investment 100 120 O 110 60 90 80 70 et, with slowing global demand and continuing downside downside continuing and demand global slowing with et, 50 UGH I UGH Total investment, Index 2008 =100. 2008 Index Total investment,
2008 N V EST M 2009 Central EU28 ENT GR 2010 O W T
2011 R H E North W M est
2012 A I NS M 2013 O D EST 2014 U.S. South
2015 F fig . 15B 2016 F . Other high-priority structural reforms include the following: following: the include reforms structural high-priority Other term. medium the over region global business-friendly EU the most the aimmaking of the with further go could section earlier the in discussed as welcome, is levels subnational and tional na the both at environment business the improving on 2015) (EC to EU GDP percent 1.8 add could Directive Services the of implementation full that EC estimates The remain. to growth impediments significant years, in recent efforts reform major Despite the most from the increase in net wealth are less likely to less are wealth in net increase the from most the gained who those as in consumption, increase sustained and alarge unlikely is to it fuel but increased, has wealth advanced to raise the productive potential of the EU. of the potential productive the raise to advanced beto needs agenda reform structural A significant path. growth self-sustaining on a high, put Europe to enough be to unlikely recovery, it is the for tailwind astrong provided has QE the While below) Spotlight EU (see the across rates poverty ease to likely is recovery economic The narrow. gaps employment and output as rise gradually to likely is the EU across Inflation 2015, before very gradually rising toward the ECB’s the toward rising price gradually very before 2015, 0.4likely in 2014tofrom fall zero percent toin around that is EU inflation suggests forecasts inflation of survey well as the efficiency of the social protection systems that that systems social protection the of efficiency the as well as markets in labor recovery the of depth the and speed the both on depend will reduced is poverty which at rate the (World 2015c) Bank . Similarly, an emphasis , although the EU the , although The latest ECB ECB latest The Financial net . However, -
market inclusion. labor and social greater promoting while vulnerable, most the protect help to that policies social affordable with be combined to willneed This networks. efficient more encouraging by and consumers and businesses for costs Internet reduce and to access improve Strategy Market EU’s Single the Digital implementing ;and capital ventureof availability the to boost and fragmentation financialmarket remaining the with deal tounion help (World 2013) Bank innovation and creation job dynamic for needed skills the promoting and market rigidities labor tocontinuing reduce growth is expected to remain moderate. moderate. to remain expected is growth investment cantly financing conditions, improve helped signifi has QE While growth. consumption to consolidate able be will markets in labor improvements sustained Only (Carroll, gains their spend Slacalek and Tokuaoka, 2014) mand remains weak. remains mand - de medium-term the global over as subdued relatively remain to set look prices commodity and petroleum while 2017.as output is likely rise to inflation Core gaps close, in percent to two close but below of objective stability (see Spotlight on Central Europe) (see Central on Spotlight 2014 2017 and between rates in poverty improvements Romaniasuggest and Poland Croatia, Bulgaria, for forecasts Note) (see recovers Focus economy the as jobs find individuals and families help and vulnerable the support ; fully implementing the capital market capital the implementing ; fully . . Poverty . Poverty - . 27 o u t lo o k 28 e u r e g u l a r e c o n o m i c r e p o r t (ii) (i) include: risks un increase trends global divergent as downside the to tilted for EU are outlook the the to Risks certainty over external demand. demand. over external certainty
Slower externaldemand investment; and performance private-sector boost help would markets capital and labor in product, rigidities structural Reducing in manycountries. felt is impact its before time takemay it considerable and place in put being still are arrangements implementation create jobs, and growth to stimulate intended is which (EFSI), Juncker the Plan,Investment as known also 315-billion-Euro the by Strategic Fund European for bolstered be could activity investment Although sluggish. remains investment sector Private countries. EU in some remain loans non-performing of share ahigh and pressures Deleveraging weak. remains growth credit financial conditions, favorable and easing ECB’s the quantitative Despite abated. have tailwinds current the of impact the once term, medium the over EU’s the of growth sustainability the constrain would investment of recovery in the weakness Continued rigidities: Structural as it seeks to restructure local government financing financing government local to restructure seeks it as China notably most markets, in emerging slowdown Medium-term risks
resulting from a continued acontinued from resulting are substantial ey downside Key downside (iv) (iii) On the upside for EU, upside the the On prices and the weak euro. weak the and prices commodity low may as term, medium the over growth for outlook the bolster help may union banking the of ment develop in the progress further and spending public of
Regional geopolitical tensions geopolitical Regional investment; for funding of predictability the reduce and markets capital and rates in exchange swings further trigger could EU inJapan, the and policies monetary divergent of in acontext set rise, rate interest U.S. to of timing the related volatility in financial-market upsurge An financing costs; and prospects growth affect adversely and investment slow market confidence, hamper could recovery Aprotracted growth. EU the export slow could US, in the tightening policy monetary imminent the or demand, domestic toward growth rebalance and (Box 5). common solutions (Box for calls flows migration and refugee recent the particular, In confidence. building for important be will commitment European Astrong recovery. the in confidence undermine EU could the and for risks improvements in efficiency in efficiency improvements
also pose economic economic pose also - BOX 5. THE EU AND THE REFUGEE CRISIS m e n t s p e lo v d e
c i The European Union is encountering an unprece- number of refugees then diminished, but shot up again dented influx of refugees and migrants as forced in the past couple of years. The vast majority of interna- e c o n o m displacements accelerated significantly in 2014, turning tional refugees remain in countries close to their own. it into the year with the highest number of internally Refugees equal less than 8 percent of the total of more e c e n t
displaced on record and the highest annual increase in a than 250 million international migrants, and 0.2 percent r single year (UNHCR 2014). Historically, the number of of the global population. The number of Syrian refugees refugees increased from the 1950s (after the refugees has reached 3.8 million, the largest in absolute numbers involved in the huge population transfers that followed currently, but less than the 5.6 million Afghan refugees World War II were resettled) until the peak of 17.8 million in 1989. persons following the collapse of the Soviet Union. The
As a result of the larger influx of refugees, the number Yet, the Nordic and Baltic EU countries, which have the of people seeking asylum in Europe increased highest share of first-time asylum applicants, are about dramatically. In Q2 2015, the number of first-time asylum 0.2 percent of the total. Between April 2011 and October applicants reached 213 200. This was an increase of 85 2015, a total of 679,240 Syrian asylum applications were filed percent compared to the same quarter in 2014 of which in Europe, equal to 0.13 percent of the EU28 population at 69.7 percent was due to applications from Syrians, Afghans, the end of 2010. This number remains very small compared Albanians and Iraqis. The highest number of first-time asylum to Syrian refugees registered in neighboring countries. applicants in the second quarter of 2015 was registered The total number of registered refugees in Turkey, in Germany (38% of total applicants in the EU), Hungary Lebanon, and Jordan amount to 3.249 million, and make (15%), Austria (8%) and Italy, France and Sweden (about up 10.4 percent of their 2010 populations. The number 7% each). These six Member States together accounted for of Syrian refugees in Turkey, Lebanon and Jordan alone is more than 80% of all first applicants in the EU-28. In fact, eight times higher than those in all European countries Hungary saw its number of asylum seekers jump more (400,000 Syrian refugees in 2014). than 13 times compared to the same quarter of 2014.
While the refugee crisis is likely to bring costs in most other countries that have received a large influx of the short term, there are potential benefits in the immigrants, Europe has the resources, the experience medium to long-term. In the short-term, this influx to and the capacity to turn the refugee influx not only into the EU is likely to put a strain on public services provided an opportunity for the refugees but also for domestic in some transit and destination countries and may lead economies. Economic inclusion including access to to a moderate increase in spending as a share of GDP in employment will facilitate, not only integration, but also, the most affected countries, notably for delivery of public ultimately, larger fiscal contributions of refugees. Policy services and integration support. In the medium-term, the responses should focus on helping to contain the crisis net fiscal impact and net economic benefit of immigration in the source country, alleviate capacity constraints in is likely to turn positive, in particular for rapidly ageing transit countries and develop monitoring mechanisms societies, provided efforts to integrate refugees into and policies and regulations to accelerate the integration domestic labor markets are successful. Compared to of migrants into domestic labor markets.
29 c h a p t e r t hr e e
SPOTLIGHT O N C EN t r a L EUROPE 32 e u r e g u l a r e c o n o m i c r e p o r t 15 re a slow of poverty pace into translate to likely is which modest, be to projected is recovery Bulgaria’s Czech Republic, Poland, Romania and the Slovak Republic, Slovak the Romaniaand Poland, Republic, Czech widely. varies reduction, poverty thus of recovery,and pace expected the EU, the though in rates growth fastest ofsome the enjoy to continue countries European Central The likely to materialize. The deficit likely to deficit materialize. The basis) (accrual projected is not are in spending savings expected the of while some performance revenue to buoyant due likely achieved is to be 2015 for planned consolidation fiscal substantial The 2013. since July negative been having 2015 rates annual the with October in percent However, mance. 1.2 minus was inflation market perfor labor better and EU-fundedof projects, implementation improved from ones public mainly ments, of invest recovery the of 2015, half to EU the first in the exports strong by supported expected, initially than higher in 2015likely is to be Growth 20162015 and respectively. of recovery is slower in Bulgaria and Croatia than in than the Croatia and in Bulgaria slower is recovery of since 2009. levels pace The lowest to their declined have rates unemployment countries, Inmost spent. to be start funds budget in new 2016 the as to moderate pected ex is impact the but in Europe 2015, in Central growth 2007–13) for amounts budgeted of use boosted also for deadline the (before Funds Cohesion and Structural EU of absorption in the acceleration The conditions. credit easing and products, food and petroleum from inflation low growth, wage and employment improving by bolstered been generally has EU. Consumption the of rest the from to demand due mainly growth, export robust continuing and demand domestic by driven is
additional information on selected countries, in particular Bulgaria, Croatia, Poland and Romania, where the Bank is supporting efforts to bolster growth and shared prosperity. shared and growth bolster to efforts supporting is Bank the where Romania, and Poland Croatia, Bulgaria, particular in countries, selected on information additional This section at looks economic developments in and the poverty Central European countries, where the World Bank has historically had the strongest engagement. It provides duction. Growth is projected at 2.9 and 2.2 percent in percent 2.9 at 2.2 projected and is Growth
15 Economic growth in the region region in the growth Economic s p l t o H G I t
n o - - -
t n e c 40 20 30 Q reduction. poverty of rate the impact will employment, particularly and of recovery, speeds differing The 2015. in more or to 3percent grow all are projected which levels and decline slowly to 14.1 in 2016. slowly decline percent and levels pre-2008 above to remain expected –is interms day PPP per US$5 at – measured poverty of recovery, pace modest However, the given reduction. to poverty contribute to expected are jobs in finding youth to help Program Y the and increases minimum wage as well as benefits and heating subsidies for children and the elderly, the and for children subsidies heating and benefits in 2016 year 2017. and per GDP of points child Increasing percentage 0.5 about by deficit fiscal the reduce further to expected also is government Fund. Insurance The posit - De Bulgaria the by deposits guaranteed of to payout the related factors in 2014,to one-off due percent mainly 5.8 GDP, of percent to toto increase 2.8 the decline following 25 10 35 15 0 5 fig Source: Poverty US $5/day (PPP) percent 2008-17 $5/day (PPP) US percent Poverty r P . 16 2008 l a World Bank projections. Bulgaria
O e V 2009 R U E R o T Y I Y 2010 p S e PR O
Croatia 2011 J ECTE
2012 D D TO
2013 E D ECL Poland I 2014 E NE outh Guarantee Guarantee outh 2015 F Romania 2016 F
2017 F is expected to grow at a rate above 3.5 percent over the over percent 3.5 above arate to at grow expected is economy Poland’s declined. prices food and energy as have fallen 2014, prices since and July consumer range target percent 1.5-3.5 Bank’s Central the below been has inflation headline 2013, (budget). February Since perspective financial the from EU’s previous disbursements final and rates interest low record confidence, growing profits, corporate solid by supported was percent). Investment 2.3 at pensions and cent per 2.5 at growing been have wages sector (private wages higher from and declines price consumer from households, to growth credit strong relatively from benefited also It year, the of half to 7.4 2015. of quarter 2nd in the percent first the over points 2 percentage almost by rate declined unemployment the as market conditions labor improved of as aresult incomes disposable real higher from benefit toof 2015 half continued first in the consumption Private term, supporting a pickup in poverty reduction poverty in apickup supporting term, over medium the percent 3.5 above remain 2015 and for percent 3.5 reach to projected is Poland in growth countries, two previous the to contrast In marginally, only to decline to 9.3 in 2015 projected is percent poverty growth, wage and employment private stronger of in 2014 9.8 at unchanged absence Inthe essentially percent. $5/day at remained measured rate, 2005, PPP poverty the that estimated is It level. pre-crisis its below 8 percent in 2014 flat per-capita Real at income. remained income pension on dependent households on impacts poverty adverse with 2015, September by annually percent 1 by declined pensions real of 2015, months nine first the year-on-year percent 3.7 by grew wages real While in restructuring. corporate slower with shedding labor reduced and market policies labor average),moving active despite of 2015 half (four-quarter first in the 17 percent about at high, remained Unemployment exports. and consumption in personal rise agradual with together accession, after years two EU of funds adoubling by supported growing, finally sector construction the with in 2015, percent marginally. only decline to projected poverty with quarters, for twelve contracting after pace, modest at a very recover to expected is activity economic Croatia, In The economy is expected to grow by 1.5 to1.5 by grow expected is economy The - .
fall to 4.2 percent by 2017. by percent to 4.2 fall in 2014, to percent 4.8 and an estimated from down 2015, in 4.6 reach percent and years recent than pace faster PPP, US$5/day a the by at to in decline 2005 expected is measured poverty, developments, these by Underpinned changes. these to reflect amended be will budget the commitments made during and year the election current from resulting indexation pensions’ generous more or elderly children,the with families supporting programs and benefits social new to of rise with the introduction poised are expenditures Social in 2016. GDP of percent to 3.2 increasing before in 2015, in 2014 GDP of topercent 3.0 percent projected to decrease its headline deficit modestly, from 3.2 3.2 from modestly, deficit headline its to decrease projected is Poland schedule, of ahead ayear in 2015, Procedure Deficit EU the Excessive exited Having growth. investment solid and to rise, continue wages and percent), employment as 3.5 (around consumption private robust amid growth of driver likelymain is the to remain demand ances. Domestic imbal external and internal negligible with term, medium peringsector. financial the (31.1 ham debt loans public percent) and non-performing 2015) corporate and in September (12.1 percent household of high levels with subdued, remains also growth Credit in 2016. 2015 and meet should Government Croatian the that recommendations new six areas,”of given has and in anumber expectations below remains ambition of “level the that out pointed it deficit, large its for Croatia against action any corrective to not activate 2015 decided in June Council the European Although deficit. the to reduce targets Procedure (EDP)ambitious Deficit set has that Excessive the EU under required consolidation fiscal much-needed to due a subdued to remain projected is consumption medium-term, the government Over 2015. August by GDP of percent to 85.7 2008, from than doubled more has debt public EU, inas the level highest the in4.9 2015, percent high toat remain in 2014, expected is percent and 5.6 was deficit fiscal government general The years. six last the over percent 6 which averaged deficit, high fiscal the is problems 9.0and pressing most the of in 2016. One percent - - 33 s p ot l i g h t o n c e n t r a l e ur o p e 34 e u r e g u l a r e c o n o m i c r e p o r t consumption and investment. The Fiscal Code approved approved Code Fiscal The investment. and consumption domestic strong by to 3.9to rise in 2016, supported percent however, expected is growth, GDP production. in agricultural year, entire the tofor adrought-induced in part due decline percent to 3.6 slightly to slow projected 2015 is for growth developments, positive the Despite EU of funds. absorption lower-than-expected reflecting subdued, remained has investment public strongly, but recovered have sectors industrial and construction The 2015. in August percent 1.9falling negative to to inflation contributed which 2015, VATthe in June 24 to 9 percent from percent food rate for in adecline and in wages increases of back the 2015 on of half first in the 5.4 of rate percent growth annual an reached which consumption, in private rise astrong by led further declines in poverty. in declines further to 2016, contributing in percent 3.9 2015 and in percent at 3.6 grow to expected economy is Romania’s Economic growth has been been has growth Economic
to 22.1 percent in 2017. percent to 22.1 to decline projected is rate US$5.00/dayThe poverty PPP incidence. in poverty declines to further lead and incomes real boost should inflation low by aided wages, real and in employment growth and demand domestic of recovery Continued minimum inwage. the increases as well as programs, benefit heating and benefit to family income, to minimum guaranteed the allocations increased include These categories. to vulnerable support increased and market conditions labor by improved driven line, poverty in in 2011 2014, US$5.00/day to the 28.4 percent using PPP percent 35.8 from to declined have projected is Poverty including a cut VAT 24 to 20 percent. from percent rates 1.1 GDP, of percent in Council, to according Fiscal the to amount could 2016, which in January starting cuts, tax several 2015 envisages in September Parliament by the - FOCUS NOTE w e l fa r e s t at e s 16 a n d p r o t e c t i o n o f t h e p o o r i n t h e e u r o p e a n u n i o n
38 EU MEMBER STATES ARE AMONG THE BIGGEST SPENDERS ON SOCIAL PROTECTION IN THE WORLD…
42 …HOWEVER NOT ALL COUNTRIES PROVIDE EFFECTIVE PROTECTION FOR THE POOR
46 MOST WELFARE STATES CUT SOCIAL ASSISTANCE SPENDING DURING THE CRISIS…
48 …WITH DIFFERING OUTCOMES FOR THE POOR
51 EU MEMBER STATES WOULD NEED TO PROVIDE ADEQUATE PROTECTION AND SOCIAL INVESTMENT FOR THE POOREST WHILE ENSURING FISCAL SUSTAINABILITY 36 e u r e g u l a r e c o n o m i c r e p o r t social protection expenditures in Poland and Portugal, to Portugal, and in Poland expenditures protection social overall of 9percent about of alow from range programs its populations in many countries. As the relative size of relative the As in manycountries. populations its of age median high the reflecting in part pensions, age countries, the youth unemployment and inactivity remain remain inactivity and unemployment youth the countries, EU in most level to pre-crisis their have declined rates unemployment While long-term for growth. consequences adverse with market prospects, labor future ill for bodes and outcomes education undermines young, the among Developments) (see Europe Economic in Southern Recent high, especially EU remains still across poverty strength, gaining is recovery 16 investing in the poor. the in investing and protecting in role important aparticularly has but spending protection social of overall fraction asmall constitutes expenditure assistance Social expenditures more spend states EU member out of 28 Seventeen recovery? economic of fragile Europe’s context the in poor the protect H is on social insurance (see insurance social on is
housing and other social services (Barr, 2012). For the purposes of this note, the welfare state is defined more narrowly with a primary emphasis on its ability, through non- through ability, its on contributory socialemphasis assistance programs, to protect the poor.primary a with narrowly more defined is state welfare the note, this of purposes the For (Barr, 2012). education, health, services like social benefits other and in-kind and housing policies, labor and assistance social insurance, social like benefits cash of consisting as defined usually is state welfare The ow well positioned are European countries to to countries European are positioned ow well than the OECD average on social protection protection on social OECDaverage the than the biggest spenders on social EU member states among are
fig . Higher incidence of poverty, especially especially poverty, of incidence . Higher protection in the world… the in protection . 17 . A large proportion of this expenditure expenditure this of proportion . Alarge While the European Union’s growth Union’s European the While growth Expenditure on social assistance assistance social on Expenditure
Box 6 Box
), and in particular on old on in particular and lifecycles. Last resort social assistance programs help programs assistance social resort Last lifecycles. their across risks potential against vulnerable most the and chronic poor the cushioning of in terms important pillar,very are insurance social programs assistance social to the compared small are when expenditures Although in Sweden. percent 35 and in Denmark percent a high 33 of the importance of robust social protection systems. systems. protection social robust of importance the highlights This potential. productive their maximize to fully in order society of weaker segments otherwise and youth, in children, investment requires long-termcontinued growth to decline, projected are populations age working the poorest most vulnerable population. population. vulnerable most poorest to the protection adequate and well-targeted providing on to focus need states EU member challenges, these protection. address To effective an provide can governments constrained fiscally how question the raising downside, to the EU tilted the remain for to outlook the Risks poverty. old-age future of likelihood the increasing pensions, ment - retire for eligible to become needed periods contribution minimum the likely are to affect unemployment of spells long earnings; future depress to significantly found been Y EU economies. high in several outh unemployment has unemployment outh
Q with families in invest and protect child benefits capital; in human investment for enabling to work, able are that those activate potentially and chronic poverty alleviate 20 30 25 10 35 15 0 2. 1. mainpillars: into three divided be can protection Social 5 fig with adjustments as defined in Annex 1. Annex in defined as available, adjustments data with recent most the as 2012 with ESSPROS from components) individual into breakdown (including data Protection Social uses note the of rest The Source : Social protection spending, Europe and comparators as a share of GDP in 2012 in GDP of ashare as comparators and Europe spending, protection Social Social assistance Social insurance Social poor and vulnerable from shocks, but also tackling tackling also but shocks, from vulnerable and poor thetance of protecting objectives dual the pillar has from the general government The social budget. assis financed is and individuals or families vulnerable and ment of labor income when a worker retires. retires. aworker when income labor of ment - replace of form some to is provide old-age pensions of goal the and pillar; insurance social in the element expenditure largest the often are Old-age pensions contributions. through financed mostly is It poverty. age disability,old- or sickness, of risks market against labor
France E . 17
The definition of social protection expenditure differs across various sources. The data for this graph derive from the OECD SOC OECD the from derive graph this for data The sources. various across differs expenditure protection social of definition :The /Note OECD. Belgium U M U Denmark E
Finland M BE
Italy R STATES
aims to cushion workers in the formal formal in the toworkers cushion aims Austria primarily aims to support the poor poor the to support aims primarily Sweden
S BOX S 6. Spain P EN
Greece D ON Germany
A
Portugal V E R ocial
Netherlands A G E
Slovenia M O
Luxembourg R E P
Japan ON rotection
United Kingdom SOC -
Hungary I AL PR 3. Ireland to jobs. back others connect help can market, and labor the from excluded be may that disabled the support benefits children; disability OTECT Labor market policies market Labor tested (e.g. programs). minimum income guaranteed (e.g.and/or benefits) categorical be can disability means- they program of the objective on the Based benefits. family or or child benefits heating benefits, housing below), see function, classified” elsewhere not exclusion “social the under surveys in Eurostat captured generally (which programs minimum income are guaranteed include can They chronic poverty/vulnerability. from escape their to promote in people investing and poverty wage subsidies and public works programs. programs. works public and subsidies wage services, employment through force into work the facilitate to role (re-)entranceactive an and benefits) unemployment such as measures passive of (in case the Norway 21,6 OECD - Total I New Zealand ON F
T
Czech Republic H unctions AN Poland
OEC Switzerland D D
United States CO
Australia U NT play both an insurance role insurance an both play
Slovak Republic RI ES Iceland
Canada
Estonia
Israel
Turkey database. X database. Chile
Korea
Mexico 37 welfare states and protection of the poor in the european union 38 e u r e g u l a r e c o n o m i c r e p o r t states welfare truncated coverage; assistance high social and spending protection categories: as high spenders classified are tection pro insocial 2012 on GDP of 16 than percent more spend (see (see in acrisis poor the protect and chronic poverty to tackle leveraged potentially be can that instruments of types the or resources allocated of effectiveness the for aproxy is which 20 19 18 17 There is no single European welfare state. state. welfare European no single is There anced welfare states with low social protection spending, spending, protection social low with states welfare anced small coverage; bal assistance social low but spending, coverage coverage assistance high social with countries as population the of 20 percent poorest the of percent 60 than more cover that poorest the of coverage the is dimension second citizens. The poorest its to protect Y protection. social of to provision the allocates asociety resources a share of GDP, as overall the spending for a proxy is which protection social is the dimension first citizen. The the and state the between contract social underlying the of outcomes intermediate are that key dimensions two using EU the classified are across systems protection
the protection drops sharply at the lower parts of the income distribution. distribution. income the of and parts workers) lower the sector at formal sharply cases drops most (in group protection the certain to a offered is protection social public where systems to refers state welfare truncated (2004) Fizsbein in outlined As efficient instruments (such as providing subsidies or using pensions as the main crisis response instrument), which may make crisis response prohibitively expensive and expensive prohibitively protection. little with leave the population response crisis make may which instrument), response crisis main the as pensions using or less subsidies on rely to had providing have as (such often program instruments targeted efficient poverty effective an without and coverage smaller with countries contrast, In to crisis. toa programs such efficiently and leverage to quickly placed respond better are countries exist, already poor the of coverage high areasonably with programs well-functioning and well-targeted When in each country. In fact, the relative at risk poverty rates in 2012 (from SILC 2013, latest year data is available) range between 9 to 21 percent with 16 percent as the simple simple the as EU. the percent for 16 with average percent 21 9to between range available) is data year latest 2013, SILC (from 2012 in rates poverty risk at population relative the the of fact, In segment country. each in vulnerable most the of representative are quintile) (bottom population the of percent 20 poorest the that assume we note this of purposes the For The median (and mean) expenditure on SP among all member states in 2004 was 16 percent and is used as the cutoff point for the typology. the for point cutoff the as used is and percent 16 was 2004 in states member all among SP on expenditure (and mean) median The A nne x 1 fig for a definition of coverage) of a definition for Large balanced welfare states welfare balanced Large . 18 et, it says little about how willing a society is asociety willing how about little says it et, . On this basis, countries can be divided into 4 into4 divided be can countries basis, this . On 20 with high social protection protection high social with 17 by overall social assistance by overall social assistance 19 . Countries that . Countries with high social social high with ; and countries countries ; and Social 18 - -
Q 7) in (Box described as acteristics char distinct fairly have groups These coverage. assistance social low and spending protection social low with states welfare limited and coverage; assistance high social but Social assistance coverage of the bottom 20 100 fig data for Germany. for data coverage have not do we since ranked, not is Germany 2011. from are UK the and Note: Source: Social protection spending and social assistance coverage, 2012 40 60 90 80 20 70 30 50 10 5 T . 18 Labor market spending data for 2012 for Greece are from 2010, for Cyprus Cyprus for 2010, from are Greece for 2012 for data spending market Labor 6 welfare states Small balanced welfare states Limited World Bank staff calculations using ESSPROS 2012 and EU-SILC 2013. / 2013. EU-SILC and 2012 ESSPROS using calculations staff Bank World 7 H 8 E R 9 E 10 A R 11 Social protectionspendingasshareofGDP E LV EE RO 12 FO LT 13 UR DI UR BG SK 14 CZ MT PL 15 HR ST 16 I NCT 17 IE HU 18 SI E and analyzed innote. this analyzed and 19 CY ES UR LU 20 PT UK O 21 P BE W EAN 22 NL FR 23 EL
welfare states Truncated welfare states Large balanced AT 24 IT SE FI ELFA 25 26 R 27 E 28 STATES 29 DK 30 - BOX 7. TYPOLOGY OF SOCIAL PROTECTION SYSTEMS on i n u
ean p o ur e
e h t
Large balanced welfare states are characterized by Large balanced welfare state Small balanced welfare state n
Truncated welfare state Limited welfare state i
high social protection spending that goes hand in hand r Large balanced welfare state Small balanced welfare state with high social assistance coverage of the poorestTruncated welfare quintile state Limited welfare state oo p
e and includes most Western European countries – Austria, h t
f
Belgium, Cyprus, Denmark, France, Finland, Hun- o
gary, Ireland, Luxembourg, the Netherlands, Slo- on i venia, Sweden, and the United Kingdom. Averaging 21 percent of GDP in 2012, their social protection spending is otect pr relatively high. They have a relatively more balanced and breakdown between social assistance and social insurance spending, enabling them to offer protection and income states
replacement (upon retirement) to formal sector workers e r a while also providing safety nets for the poor and vulnerable. f
These countries are able to cover a significant portion of wel the bottom quintile (around 80 percent on average) through their social assistance programs. The social protection system includes a more balanced mix of programs with basic elements that buffer against different risks (e.g., risk designedLarge balanced to welfare protect state vulnerableSmall balanced welfare groups, state such as the young Truncated welfare state Limited welfare state of unemployment, of disability, of poverty). It also includes and the poorer segments, of society against risks. instruments to connect people back to opportunities, such as providing job search assistance, counselling, social Small balanced welfare states are characterized by services, and so on. It is important to note that large low social protection spending, but high social assistance balanced welfare states are expensive. Fiscal sustainability coverage of the bottom quintile. Latvia, Lithuania, of the system provides the key risk in terms of whether Romania, Slovakia, and the island of Malta, fall such countries can continue to provide protection during under this group. Most have reformed (and continue to future crisis episodes. A fall in GDP could necessitate cuts reform) their social protection systems since the 1990s in expenditure, and the quality of fiscal consolidation transition and have steered them to a relatively more will determine if these states are able to become leaner, balanced approach which offers a mix of programs that but still maintain protection of the vulnerable. cover various risks and covers a large share of the poor- est population mostly through categorical/universal Truncated welfare states are characterized by low programs but still at relatively low costs. coverage of the poorest quintile by social assistance despite high levels of social spending. The Southern European Limited welfare states are characterized by low social countries, Greece, Portugal, Spain, and Italy, fall in this protection spending and low coverage of the poorest group. Their overall social protection spending around quintile by social assistance. Bulgaria, Croatia, Czech 21 percent of GDP is similar to that of large balanced Republic, Poland, and Estonia fall in this group. Similar welfare states. Yet, a relatively large share of their spending to the small balanced welfare states, these countries is dedicated to social insurance. This system thus focuses started to reform the social protection systems they had on covering formal sector workers and managing the inherited from socialist times. Yet, they chose a different lifecycle risk of old age poverty. Overall social assistance direction by limiting the protection offered by the public programs, or indeed coverage, of the non-formal sector, sector, resulting in minimal protection of the poorest is not well-developed. The system is therefore not well segments against various shocks.
39 40 e u r e g u l a r e c o n o m i c r e p o r t 100
Q Q coverage. higher mean matically H
states (2.2 percent vs 2.9 vs GDP, of percent percent (2.2 respectively) states welfare truncated than assistance social on less spend states 40 60 90 80 20 70 30 50 10
0 % GDP 10 igher spending on social assistance does notauto does assistance on social spending igher 4 0 6 9 fig fig 8 2 7 3 5 Social assistance spending as a share of GDP in 2012 in GDP of ashare as spending assistance Social Source: Source: Social assistance coverage of the bottom 40 percent in 2012 in percent 40 bottom the of coverage assistance Social 1 SOC . 19 IE ...w . 20 DK World Bank staff estimates using EU-SILC. /Note: EU-SILC. using estimates staff Bank World LU ESSPROS using estimates staff Bank World SE provide effective protection protection effective provide I it
NL AL
f implications h varying FI
FR ASS CY I Large balancedwelfarestates UK STANCE LU Large balancedwelfarestates HU UK
S FI 5,7 P
Average …not countries all EN
SE HU DI N 80,4 G V G Average NL welfare Small balanced A t or
DK RI AT poor the for ES
Germany is not ranked, since we do not have coverage data for Germany. for data coverage have not do we since ranked, not is Germany SI BE WID h o e coverage AT DE EL
BE IE Y AC fig CY FR R OSS . 19 - ,
Truncated welfarestates SI f t
PT E Truncated welfarestates UR
h IT
IT percent 56 at poor the of (1.7 percent), share to alarger cover manage assistance social on least the spend which states, welfare limited Even 20. bottom the of coverage better much achieve they yet 40 percent 40 e bottom O P 39,5 EL Average EAN Average 2,9 EL W
ES ELFA ES
PT R Small balancedwelfarestates MT E
STATES Small balancedwelfarestates SK SK MT
78,1
Average … LT
LV fig Average 2,2 . 20 LT RO .
RO LV BG BG Limited welfarestates Limited welfarestates PL CZ
EE Average 1,7 55,5
Average HR
HR PL
CZ EE due to their universal nature. Large balanced welfare states on
The composition of spending matters; large and small i n u balanced welfare states achieve higher coverage also spend more than 1 percent of GDP on means-tested
through a combination of family benefits (which housing and social exclusion benefits; however this is ean p are mostly universal) and “social exclusion n.e.c.” much smaller (0.3 percent of GDP) among small balanced o ur
21 e Most welfare states. Both large and small balanced welfare programs (which are mostly means-tested) . e h t welfare states spend a larger proportion of social assistance states achieve high coverage of the bottom 20 through n i
expenditures on categorical programs than on means-tested the social exclusion benefits (22 percent and 40 percent, r fig. 21 fig. 22 programs . The largest spending sub-category across respectively ). Coverage of the bottom 20 through oo p
e all programs is the universal family/child benefits in both family benefits is also high in the large (61 percent) and h t large balanced (1.76 percent of GDP) and small balanced small (59 percent) balanced welfare states. f o
(0.68 percent of GDP) welfare states, which are expensive on i
Q fig. 21 CATEGORICAL PROGRAMS DOMINATE SOCIAL ASSISTANCE SPENDING ACROSS EUROPEAN WELFARE STATES otect pr Means-tested vs. categorical spending, by program in percent GDP in 2012 and
4,0 0,16 states
3,5 e r a
3,0 f 1,76
2,5 wel
2,0
0,54 0,13 1,5 0,97 0,43 0,18 0,68 0,51 1,0 0,30 0,63 0,12 0,80 0,42 0,58 0,36 0,5 0,30 0,90 0,27 0,38 0,33 0,12 0,33 0,36 0,38 0,0 0,15 0,08 0,06 0,06 Large balanced Truncated Small balanced Limited Large balanced Truncated Small balanced Limited
Means-tested Categorical
Disability Old-age Family/children Housing Social exclusion n.e.c.
Source: World Bank staff estimates using ESSPROS.
The quality of means-testing and who is targeted national poverty targeted program, and this significantly matter for coverage. Even though truncated welfare reduces their ability to cover the poor. For instance, Italy states spend more than 1 percent of GDP on family benefits spends 4.2 percent of GDP on social assistance and only (combined between means-tested and universal programs), spends 0.1 percent of GDP on means-tested social exclusion they achieve much lower coverage compared to lower benefits. In contrast, Slovakia spends 2.9 percent of GDP spending small balanced and even limited welfare states on social assistance, of which 0.4 percent goes to the fig. 21 & 22. This raises questions about the types of means-tests main poverty focused program, Benefit in Material Need. used to target various benefits. Similarly, truncated welfare In addition, the disability benefit is also income-tested. states spend 0.18 percent of GDP on means-tested social Consequently, Slovakia covers more than 80 percent of exclusion benefits, they achieve even lower coverage the poorest through its social assistance system whereas (10 percent) than limited welfare states, which spend a Italy covers less than 50 percent fig. 20. meagre 0.12 percent of GDP. Both Greece and Italy lack a
21 Social exclusion not elsewhere classified (n.e.c) includes programs that are not classified under the non-contributory old age and disability benefits, family benefits, and housing benefits. They mostly include guaranteed minimum income programs and other types of last resort social assistance programs, and are mostly targeted towards the poor.
41 42 e u r e g u l a r e c o n o m i c r e p o r t benefits balanced welfare states, such as Belgium, also show a show also Belgium, such as states, welfare balanced large Some richest. the of percent 48 also but poorest, the of 70 percent covers Similarly,20 percent. Latvia richest the of percent 51 also but assistance, social with population the of 20 percent poorest the of percent 56 covers Estonia instance, –for states Baltic in some acute
22 Q fig states. EU member several in significant is rich the to benefits assistance of social Leakage Q receive social assistance benefits in these countries in these benefits assistance social receive also population the of 20 percent richest many in the time, same Atthe states. welfare small balanced and in large poorest of the coverage good tolead benefits family Universal savings. fiscal provide could leakage 40 40 60 60 20 20 70 70 30 30 50 50 10 10 0 0
Universal family benefits may have an additional social policy objective of increasing fertility. However, there’s mixed evidence on pro-natalist policies on fertility and labor force force labor and fertility on policies pro-natalist on rate of financial Purely participation are women. measures evidence mixed there’s However, fertility. increasing of objective policy social additional an have may benefits family Universal fig fig . 23 Source: Source: 2012 in program by PERCENT 20 bottom the of coverage assistance Social Social assistance coverage of (leakage to) the richest 20 percent in 2012 in percent 20 to) richest the (leakage of coverage assistance Social . Much of the coverage of the rich comes from family family from rich comes the of coverage the of . Much HIGH . 22 SOC . 23 IE IE 80,4 80,4 Large balancedwelfarestates Large balancedwelfarestates World Bank staff estimates using EU-SILC. /Note: EU-SILC. using estimates staff Bank World /Note: EU-SILC. using estimates staff Bank World
BE BE fig 61,2 61,2 . 24 I E AL R DK DK Overall socialassistance Overall socialassistance 22 CO
ASS . The leakage to the rich is particularly particularly to rich is the leakage . The 34,3 34,3
NL NL V E I STANCE R Large balancedwelfarestates Large balancedwelfarestates
FI FI A 22,0 22,0 G E
SI SI OF
LEA LU LU BOTTO 36,7 36,7 K
AverageAverage A G M20P E 39,5 39,5
SE SE TO Truncated welfarestates Truncated welfarestates
E T
HUHU R H CENT 29,8 29,8 Family benefits Family benefits E RI Germany is not ranked, since we do not have coverage data for Germany. for data coverage have not do we since ranked, not is Germany Germany is not ranked, since we do not have coverage data for Germany. for data coverage have not do we since ranked, not is Germany FR FR C I Containing Containing H I H S 3,2 3,2
AT AT AC S
S HI
CY CY U E BSTANT 9,9 9,9 V
UK UK E DM Truncated welfarestates Truncated welfarestates
IT IT OSTL I AL Housing Housing insufficient protection of the poor. the of protection insufficient with in countries poorest the of coverage to increase poor, the of high coverage with redirected or countries in investments or into savings channeled be then can which up resources, free would benefits, family such as programs categorical especially assistance, social of targeting Better assistance. social by covered poor the of percent 57 only with poorest, the of some excluding also of cost the However, at this achieves Poland assistance. any social rich get the of 8percent only minimizes leakage– Poland such atransfer. rich get the of 20 percent Likewise, only transfer; assistance asocial receive UK in the poor the of percent 86 rich – to the leakage in containing effective is Kingdom United the contrast, rich. By the of percent poor, the of 67 –covering percent 44 but similar pattern
PT PT I Y N T 10,4 10,4 M HR 78,1 78,1
AverageAverage Small balancedwelfarestates Small balancedwelfarestates AN O UGH UGH
EL EL Y 58,8 58,8 E UR Social exclusionnotelsewhereclassified Social exclusionnotelsewhereclassified ES ES FA O MI 16,6 16,6 P Small balancedwelfarestates Small balancedwelfarestates EAN MTMT L Y
LV LV BENEF W 40,1 40,1
SK SK ELFA I TS 38,8 38,8
R AverageAverage AN E
STATES D
RO RO SOC 55,5 55,5 LT LT I AL Limited welfarestates Limited welfarestates
E Limited welfarestates Limited welfarestates
EE EE X 48,5 48,5 CL
BG BG U S I 19,9 19,9 ON
AverageAverage 7,1 7,1 PR
CZ CZ O 12,2 12,2 GR
HR HR A M
PL PL S fig. 24 LEAKAGE TO THE RICH IS MAINLY DUE TO FAMILY BENEFITS on
Q i n u
Social assistance coverage of (leakage to) the richest 20 percent by program in 2012
38,8 ean 38,8 p
36,7 o 36,7 ur
32,3 e 32,3 30,3 e
30,3 h t
n i
r 19,9
19,9 oo
17,3 p 17,3 e h t
10,4 f
10,4 o 6,6 6,9 6,6 6,9 on i 2,3 2,6 2,6 2,3 0,9 0,7 0,7 0,1 0,8 0,9 0,7 0,7 0,1 0,8 otect pr
Large balanced welfare states Truncated welfare states Small balanced welfare states Limited welfare states Large balanced welfare states Truncated welfare states Small balanced welfare states Limited welfare states and Overall social assistance Family benefits Housing Social exclusion not elsewhere classified Overall social assistance Family benefits Housing Social exclusion not elsewhere classified
Source: World Bank staff estimates using EU-SILC. / Note: Germany is not ranked, since we do not have coverage data for Germany. states
e r a In addition to coverage, the adequacy of transfers is assistance, have had the greatest success in reducing poverty f wel important to lift people out of poverty; yet not every through social transfers 23, reducing the poverty rate from 22 country can afford high coverage and reasonable ade- percent to 14 percent through social assistance transfers, an quacy. The adequacy of benefits, measured as the share of impressive 8 percentage point reduction fig. 25. Spending less, transfers relative to the total disposable income of the ben- the small balanced welfare states achieve high coverage, but at eficiary households, is a complementary dimension of the lower adequacy levels fig. 26. Therefore, they are not able to pull extent of protection offered to the poor. Large balanced as many people out of poverty. Still, they obtained a 4 per- welfare states, which also have the highest adequacy of social centage point reduction in the “at risk of poverty rate” in 2012.
Q fig. 25 LARGE BALANCED WELFARE STATES ARE Q fig. 26 ONLY FEW COUNTRIES CAN AFFORD HIGH COVERAGE THE MOST SUCCESSFUL IN POVERTY ALLEVIATION AND REASONABLE ADEQUACY THROUGH SOCIAL ASSISTANCE Coverage and adequacy of overall social assistance for the At risk of poverty -before and after transfers, 2012) bottom 20, 2012)
25 80,4 25 78,1 22 22 22 22 22 22 20 20 20 20 20 20 18 18 17 55,5 17 55,5
15 14 15 14 39,5 38,7 39,5
10 10 27,8 28,0 22,5
5 5
0 0 Large balanced Truncated welfare Small balanced Limited welfare Large balanced Truncated welfare Small balanced Limited welfare Largewelfare balanced states Truncatedstates welfare Smallwelfare balanced states Limitedstates welfare welfare states states welfare states states welfare states states welfare states states welfare states states welfare states states Before social assistance After social assistance Coverage Adequacy Before social assistance After social assistance Coverage Adequacy
Source: World Bank staff calculations using ESSPROS. Source: World Bank staff calculations using EU-SILC 2013. Note: Germany is not ranked, since we do not have generosity data for Germany
23 Social assistance programs are typically not designed to fully lift families out of poverty – their purpose is to mitigate poverty and connect people to opportunities that can lift them out of poverty. A transfer given to an extremely poor family will enhance their welfare, and reduce the poverty gap. Transfers given to families closer to the poverty line are more likely to have an impact in terms of fully lifting them out of poverty and therefore reducing the poverty headcount.
43 44 e u r e g u l a r e c o n o m i c r e p o r t 24 Q cycle. over economic the stabilizers” of role play “automatic the to programs assistance social not allow did choices policy Discretionary real social assistance spending in terms of 2008 GDP 2008 of in terms spending assistance social real average changes, to policy Due states. welfare balanced large the in all but pro-cyclical was decade last the over EU in the spending assistance social real expectations, counter-cyclical. to often are However, needs contrary economic resulting the and to shocks responsive are that programs assistance social words, Inother recovers. economy poor,the as become contract and people more as adownturn during expand automatically will programs assistance social of coverage and expenditure
time while taking into account the country differences on the level of the spending. the of level the on differences country the account into taking over while time spending actual the compare –to years recent in countries many for GDP peak –the GDP 2008 of share the at anchored is Euros) 2005 constant (in spending Real spending. real the capture longer no GDP,therefore of may share as a measured GDP.in Spending, decline a suffered countries EU many 2008/2009, in crisis the After Percentage point change fig WHI Source : (as share of 2008 GDP) 2008 of (as share Spending Insurance Social in Change A. 2004-2012 in Spending Assistance Social and Insurance Social Real in Change 2,0 0,5 2,5 3,5 1,5 0 1 3 SOC . 27 LE 2004-08 Large balanced Germany is not ranked, since we do not have generosity data for Germany with adjustments as defined in Annex 1. Annex in defined as adjustments with Germany for data generosity have not do we since ranked, not is :Germany /Note EU-SILC. welfare states
SOC I I AL AL social assistance spending I
ASS NS 2008-12 UR I Most welfare states cut STANCE welfare states ANCE Truncated
S
S SI spendingin2008as%ofGDP(rightaxis) P P during the crisis… EN EN DI Small balanced DI welfare states N N G W G G G FELL AS It is expected that that expected is It PR I N OTECTE
Limited welfare SE V states E R AL D
CO U 0 2 4 6 8 10 12 14 NT 24
RI ES B. tance spending was already on average far higher higher far average on already was spending tance assistance assis social their though spending 2008 after social expanded even latter The 2012. and 2008 between states welfare balanced large the but systems tion inprotec all social average on fell GDP 2008 of ashare as spending assistance Social consolidation. fiscal of phase crisis a entered countries European years most when Germany, the during changed This France, Slovenia. and Kingdom, United the were these period, boom the during spending assistance social cut 4countries Only states. welfare small inbalanced the particularly 2008, and 2004 between systems protection all social across increased
Percentage point change DURI (as share of 2008 GDP) 2008 of (as share Spending Assistance Social in Change -0,4 -0,2 0,4 0,6 0,8 0,2 0 N G G Large balanced welfare states 2004-08 T H E R ECESS 2008-12 I welfare states ON Truncated
SA spendingin2008as%ofGDP(rightaxis) Small balanced welfare states Limited welfare
states fig . 27B -1 0 1 2 3 4 5 6 . - -
and (c)and the for except state limited in the all countries states; welfare small balanced the among Latvia mania and (c) Italy, Portugal; Spain, and –Greece, Ro states welfare (b) states; truncated in the all 4countries welfare balanced (a) period, recession the large during the among Slovenia expenditure assistance in social adecrease experienced European countries (Romania, instance) for countries Lithuania, European and Inseveral systems. pension private the of development of stage and ages, demography, such as retirement factors term longer by determined are and contributions, through 26 25 2012. protected the during recession between 2008 and were insurance on social expenditure contrast, By Q state. welfare truncated every in including states, EU member 11 in 2012 and 2008 between fell assistance on social Expenditure
often difficult to cut during a period of recession or slow economic growth. economic slow are or recession of expenditures period a these as during cut to programs difficult insurance often social and pensions to expansions consider carefully to expansion, economic of periods during important, is it Therefore, with flexible exchange rates, in particular in Romania. in particular in rates, states exchange member EU in flexible spending in with changes the of part asignificant explain time this during changes rate Exchange Euros. 2005 constant in measured is spending real The Percentage point change fig Source: Social assistance spending change as percent of 2008 GDP 2008 of percent as change spending assistance Social -2 -1 -1 0 2 2 1 1 T . 28 Social Insurance expenditures are financed largely largely financed are expenditures Insurance Social DK
World Bank staff estimates using ESSPROS using estimates staff Bank World H SE E D ECL FI I NE CY I N LU
SOC UK I AL
Large balanced welfare states ASS HU I STANCE NL AT Eleven countries countries Eleven
S P BE EN DI DE N G W G IE 2004-2008 AS FR M - OST SI
severe recession, from an already low base. low already an from recession, severe a of midst in the points percentage 0.77 by declined tures expendi where in Greece, was cut largest 2012; the and 2008 between spending assistance social cut state cated trun single every Germany,dom, contrast, France. and By –the King United recession in the increasing and period boom the during declining expenditures with pattern, states. welfare limited in the smallest was increase The Czech Republic, i.e. Bulgaria, Croatia, Poland, and Estonia Estonia and i.e. Poland, Croatia, Republic, Bulgaria, Czech FIG. 28 share of 2008 GDP on average across all four groups groups all four across average on GDP 2008 of share a as increased insurance social on spending real In fact, consolidation. fiscal of periods during spending tection pro insurance social cuts in of difficulty the reflecting Court Constitutional the by reversed were in pensions cuts CO 2008-2012 IT MM . Thus, only 3 countries exhibited a true countercyclical countercyclical a true exhibited 3 countries only . Thus, welfare states ON EL Truncated I N ES
T RU PT NCATE SK D D MT AN Small balanced welfare states D D LT L IMI RO TE D W D LV ELFA BG R CZ E Limited welfare
STATES states HR 25 PL fig . 27A EE 26 - - - - . 45 welfare states and protection of the poor in the european union 46 e u r e g u l a r e c o n o m i c r e p o r t from 13 percent in 2008 to 27 percent in 2012. Slovakia, Slovakia, in 2012. percent to 27 in 2008 13 percent from doubling benefits exclusion social of coverage with in Latvia, expanded coverage overall that result the with programs, means-tested on spending in real increase an was there however period; time this over marginally expenditures cut also Latvia in 2012. percent to 68 in 2008 percent poor, the of coverage 89 from assistance social overall 27 to 2012. as social increased Lithuania and Malta, Slovakia, states, welfare balanced small in countries Among states. welfare lower for limited the coverage in resulted expenditures assistance social in Cuts 1.6 million in 2012 in million 1.6 to million Euros in 2008 2.7 from Romania, of case the in large very was cut the recession; the during spending program (that mitigates poverty among the extreme poor) extreme the among (thatprogram poverty mitigates Income Minimum Guaranteed the on expenditure the 2012; however and 2004 between increased expenditures assistance social overall Bulgaria, in instance, For benefits. to marginalization havegradual led of targeted times, good in growth economic the to reflect updated been not have which In particular, thresholds, tighteligibility benefits. assistance social of all of types coverage in the in 2012 percent to 56 in 2008 61 from falling percent coverage with quintile, poorest of the coverage assistance social in lower resulted expenditures (cut) consolidation states, assistance social of welfare limited
Denoted in constant 2005 terms. 2005 constant in Denoted sistance spending as well as coverage from 2008 2008 from coverage as well as spending sistance On the other hand, Latvia and Romania cut and Latvia hand, other the On …with differing outcomes differing …with
27 . As a result, there was a large drop in drop alarge was there aresult, . As fig . 29 . This is due to adecline due is . This for the poor the for Inthe poverty targeted housing and social exclusion programs programs exclusion social and housing targeted poverty the in 2012,expanding by to76 78 percent in 2008 percent high already an from coverage expanded states welfare small balanced the aresult, As period. time this during coverage as well as spending expanded Lithuania and Malta, fig (Sundaram, Strokova, Gotcheva, 2012) Gotcheva, (Sundaram, Strokova, percent 12 by increased had beneficiaries of number the and 2008; than in higher in20 percent 2011 Republic was Slovak the ditures in program Income Minimum Guaranteed the on expen real instance, For poverty. in reducing effective cost accuracy in targeting increase an with along achieved been has welfare states. states. welfare limited in the 2008 and 2004 between 11 percent nearly by coverage assistance in social decline average an with period, pre-crisis in the begun already had programs (World 2015d) Bank fertility declining slightly and growth GDP positive mostly of in acontext threshold income the of indexation of absence the by explained partially is families in entitled million in 2013—the drop 2.3 to about million in 2008 3.8 sharply,from declined benefits family tested means of declined population of the percent 20 poorest to the benefits exclusion social of adequacy the and coverage the both a result, As in 2004. of expenditure percent 40 in 2012just is . 29 . Not only did coverage expand, but this expansion expansion this but expand, did coverage only . Not (ECA SPeeD) (ECA fig . 30A – resulting in making the systems more systems the in making –resulting . The marginalization of means-tested. The . In Poland, the number of recipients recipients of number the . InPoland, . -
Q Q Percentage point change Percentage point change fig fig t Source: Accuracy Targeting in Change A. 2008-2012 and 2004-2008 in 20 2008-2012ttom and 2004-2008 in 20 Bottom of Adequacy and Accuracy Targeting Source: 2008-2012 and 2004-2008 in 20 Bottom of Coverage in Change -4 -6 -2 h 0 4 6 2 e I . 30 C . 29 -10 -12 -4 poorest -6 -8 -2 4 0 6 8 2
EU-SILC. /Note: EU-SILC. /Note: EU-SILC. balanced Large NC U TS R EASE I 2004-2008 N
SOC Large balanced I N Germany is not ranked, since we do not have targeting accuracy and adequacy data for Germany for data adequacy and accuracy targeting have not do we since ranked, not is Germany Germany. for data coverage have not do we since included, not is Germany Truncated I
AL CO Overall socialassistance
V ASS E 2008-2012 R I A STANCE G E W balanced Small AS
S
2004-2008 AC P 2012 (rightaxis) EN HI DI E V N E G H G Limited D P D Truncated A A D DI D R TL FFE Y Y T 0 10 20 30 40 50 60 Overall socialassistance HR R ENT O 2008-2012
Percent of benefits going to the bottom 20 IMPR UGH
O U B. Percentage point change TCO Change in Adequacy in Change -7 -3 -5 -1 3 5 1 M O ES V Small balanced
E w across M balanced Large ENTS 2004-2008 I 2012 (rightaxis) N el
TA f Truncated RG o states terms in are ET I 2008-2012 N G G ACC balanced UR Small Limited AC 2012 (rightaxis) Y o f coverage Limited 0 10 20 30 40 50 60 70 80 90 5 10 15 20 25 30 35 40 45 f Percent of gross income of the bottom 20 Percent of the bottom 20 47 welfare states and protection of the poor in the european union 48 e u r e g u l a r e c o n o m i c r e p o r t clined by even more more even by clined - de incomes slightly, household increased recipient as However, 2012. and adequacy 2008 between declined benefits) age old (family, benefits, housing allof transfers base). alow from value real (starting The spending assistance Economic Developments) Recent solidation in the midst of a severe recession recession of a severe inmidst the solidation for con need the and constraints fiscal severe Greece, In land being exceptions with large declines declines large with exceptions being land Ire- and (Hungary states welfare in balanced manylarge impact negative this mitigated transfers assistance Social states. welfare truncated among 20, especially bottom the for income decreasing of driver important an clearly 28 incomes of the poor. the of incomes the on effects differential to contributed crisis the during states welfare across responses different The efficiently. and quickly assistance up social scale them have helped could that instruments; targeted poverty effective lacked crisis, economic by the hardest the werehit which states, welfare Truncated the unemployment benefit period was cut back to 3 months. back months. to 3 cut was period benefit unemployment the and since 2008, transfers social on freeze anominal with along restrictions eligibility various introduced Hungary (with Romania). of exception the states welfare balanced
The Hungarian Government decided to spend 0.8% of GDP on public works program and plans to raise this spending to 1.2% until 2018. until 1.2% to spending this raise to plans and program works public on GDP of 0.8% spend to decided Government Hungarian The FIG. 30B Declining labor income was was income labor Declining . Portugal, which entered the entered which . Portugal, led to cuts in social to cuts led 28 ), in small and (see
Box 1 Box in in -
in 2004 to 17.7in 2004 24.4 and in in2012. 2008 percent percent percent 12.3 from population the of 20 percent poorest to the assistance social overall by coverage increased Spain of Spain. incase the base low a very from to increases large due 2012 mainly and 2008 between states welfare truncated in increased coverage average the in Portugal, coverage mimeo). declining RSI, 2012 (Portugal Despite August by 300,000 than 2010 to less in January 400,000 about from declined recipients program of number The program. the to access poor the for harder in 2010, it program making the for (the conditions program RSI), eligibility tightened Minimum Income Guaranteed effective a fairly with crisis (with the exception of Spain), or in limited welfare states. (with Spain), of exception the states. welfare in limited or states welfare truncated in the impacts mitigate did not transfers 2014. assistance Social in October doubled was level benefit FSA (FSA) The Allowance programs. Support Family and Income Minimum Guaranteed the of levels benefit and budgets in the increases with trends these to reverse measures to take policy started Romania has recently, More in 2012. percent to 31 in 2008 percent 53 from dropped benefits exclusion social by poor the of in – Romania coverage benefits exclusion social and tance assis social both of in drop coverage a large was There - while ensuring fiscal sustainability while ensuring fiscal of the welfare state with the constraints imposed by imposed constraints the with state welfare of the effectiveness and sustainability the balance how to is for states EU member challenge the ahead, Looking the during assistance recent recession. on social spending cut states EU member Several protection. for effective matters of spending composition The citizens. poorest their of some for protection effective provide to unable are some world, but the in protection on social spenders biggest of some the are states member European yet they achieve much better coverage of the bottom bottom the of coverage better much achieve they yet states, welfare truncated than assistance social on less spend states welfare small balanced instance, For poverty. in mitigating and poor of the of coverage in terms matters means-tested through programs targeted is who and increased sharply and the social protection system was was system protection social the and sharply increased poverty up. Consequently scale could they instruments targeted lacked poverty but hardest, hit were states welfare truncated with Countries response. crisis on impact an had This states. welfare balanced large the in all but cyclical pro- was spending assistance social real expectations, reduction lens, this note identifies four distinct European European distinct four noteidentifies this lens, reduction social investment for the poorest EU member states would need to provide adequate protection and protection adequate provide The types of programs, extent of means-testing, means-testing, of extent programs, of types The Adopting a poverty a poverty Adopting Contrary to Contrary
populations, demands on social protection systems will systems protection social on demands populations, agingoutlook, populations, and declining working age fiscal consolidation.fiscal types of means testing. and quality the on questions raising 20 percent, bottom aof small the share only cover benefits, family on more spending despite states, welfare truncated In contrast, child benefits. to due universal and families, poor target that programs minimum income guaranteed functioning well- to having due largely population the of percent 20 provide protection. provide as well as spending contain to both able better were and toward means-tested programs categorical programs from away crisis the during resources reoriented states welfare Small balanced states. welfare large balanced than in effective less was response crisis the thus and marginalized have become programs targeted poverty states, welfare In limited effects. tothe mitigate unable offered to the poor. to the offered protection of extent the on and spending; protection states welfare andlimited states, welfare small balanced states, welfare truncated states, welfare balanced large namely models: . These models differ along the sizethe along social of differ models . These With the challenging global economic economic global challenging the With
49 welfare states and protection of the poor in the european union t grow even as fiscal space shrinks. At the same time, well targeted social assistance systems will become even r o
p shrinking younger cohorts make it imperative to invest in more important in the future, as the number of self- e r opportunities in all youth, including through well-designed employed entrepreneurs increases, unemployment spells c i social assistance to the poorest. In addition, the world of become more frequent, and if fewer are covered through work is changing. Technological change, urbanization, the current pension systems (World Development Report e c o n o m
and globalization have accelerated, creating unparalleled 2016 –forthcoming). The ongoing refugee crisis in Europe r
l a economic opportunities and challenges leading to rapid also poses a question on how welfare states can help u labor market changes. Providing efficient protection through integrate refugees. e g r
u e
Social assistance and labor market programs play unemployment benefits; do not have family members an important role in alleviating poverty, managing receiving pensions; and do not have children receiving risks, and supporting investment in the poor. They benefits. Tightening eligibility conditions during a crisis can improve individual productivity and income through (e.g. Portugal, Hungary) or marginalizing coverage during contributing to preserving and building human capital, periods of growth, as was the case in many limited welfare and through promoting access to better jobs and income. states (e.g. Poland, Bulgaria), need to be reversed to Building a robust and cost-effective social assistance pillar ensure robust coverage and adequacy. 29 is important in terms of investing in and promoting the poorest members of society. c. Reduce leakage of social assistance transfers to the rich: Several countries, particularly among the Going forward, important reform priorities include: large and small balanced welfare states, cover more than 40 percent of the rich through social assistance a. Introduce guaranteed minimum income (GMI) transfers – for instance, 61 percent of the rich receive programs that target poor families: This is espe- transfers in Malta; 58 percent in Ireland; 51 percent in cially relevant for truncated welfare states; the lack of Estonia; 48 percent in Latvia; 46 percent in Slovakia; a national poverty targeted program in Greece and Italy 44 percent in Belgium; and 43 percent in Demark. limits their ability to protect and invest in the poor. Such high coverage accruing to members in the richest The main challenge is to introduce and sustain efficient, 20 percent of the population is often through universal well targeted poverty programs that provide protection transfers that are categorically targeted (i.e. universal to the poorest while simultaneously consolidating the child benefits). Ensuring fiscal sustainability will involve large and fragmented plethora of programs. Greece is cutting back on spending and reducing leakages to currently piloting a guaranteed minimum income program, the rich. Better targeting of social assistance transfers with a plan to roll this out nationally starting in 2017. would free up resources, which can then be channeled into savings or investment (in countries with high b. Maintain effective coverage and adequacy of coverage of the poor), or redirected into increased existing social assistance programs ( especially coverage of the poorest (in countries with insufficient poverty-focused programs such as guaranteed protection for the poor). minimum income), particularly during downturns. Guaranteed minimum income programs are cost- d. Do not wait for an economic crisis to reform effective and provide mitigation against idiosyncratic social assistance; strengthening the protection as well as systemic shocks. Ensuring access to these capacity of social assistance programs requires time programs, particularly during downturns, is crucial for and political effort. families that lose jobs and that are not covered by`
29 It is also important to facilitate the connection back to the labor market for beneficiaries of poverty-focused programs through better integration of employment services with social assistance services. Several countries, such as Bulgaria, are taking initial steps towards better integration (World Bank Dimitrov and Duell 2014).
50 allowance, and social exclusion not elsewhere classified), classified), elsewhere not exclusion social and allowance, (housing allowance, family/child education benefits, benefits), assistance social survivor and benefits, ability dis benefits, sickness (which old-age includes benefits, socialinsuranceinto classified also are benefits these data, Similar to spending classified. elsewhere not exclusion social and allowance, family/childance, education benefits, housingunemployment benefits, benefits, survivor allow benefits, disability benefits, sickness old-ageon benefits, receive households and individuals that transfers the on tion statistics (ESSPROS), managed byEurostat. managed (ESSPROS), statistics tion protec social of integrated system European the from comes spending protection on social Data incomes managed byEurostat. managed incomes household and on personal data survey country of individual –acompilation (EU-SILC) conditions living and of income EU statistics the from mated esti are indicators performance protection Social (ALMPs) and public employment services. services. employment public and (ALMPs) market programs labor active on expenditures the capture not does ESSPROS of function since unemployment the database Policy Market Labor Eurostat’s from reported market spending labor with function unemployment the on (c) exclude unclassified spending; and (d) replace spending (b) costs; administration overall exclude services; care social and care health such as functions care health some to (a) data protection social on adjust spending exclude we in countries, system protection social the on focuses note As this unemployment).and classified, elsewhere not family/children, exclusion social housing, survivors, age, old disability,care, functions (sickness/health different for in-kind and benefits social cash both on spending cludes in ESSPROS possible. comparison cross-country making thus countries, across European households to benefits socialof system classification acoherent provides It ANNEX 1. DATADEFINITION 1. OF INDICATORS AND SOURCES ANNEX
It collects information information collects It - - - - -
alignment spending and indicators. performance between full not a is there areavailable, that programs all the reflect necessarily not do data income the that and sources ferent dif two from come data performance and spending the (unemployment benefits). markets that labor Given and Q as of social of performance indicators main The Q Q third, fourth, and top quintile. and third, fourth, second, (“quintiles”) bottom, the population to form the of 20 percent representing sized groups, equally into five divided then and transfers cash assistance social all before income disposable equivalised of basis the on ranked are individuals analysis, the of purposes the For
sistance cash transfers include: transfers cash sistance poorest quintile)? poorest the by received share the (focusingon transfers the Coverage: more objective measure such as the poverty line. poverty the such as measure objective more to a size the transfers the of comparing by support income provided of adequacy assess to additionally important particularly is it case, latter Inthe income. any other hardto it generate finds household the or income (ii)generating of means toother have find not does and transfer this on only to depend able is household the that so large to (i) being transfer the due transfer. the on either be could This dependent fairly is household the that imply would it large, is fraction this income? If disposable of afraction as (orAdequacy dependency): quintile)? to bottom the goes that transfers of share the on focus to (with quintile each particular goes transfers Targeting accuracy:
What portion of the population receives receives population the of portion What
What portion of social assistance assistance social of portion What
How much is the transfer transfer the is much How
- 51 welfare states and protection of the poor in the european union t
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