Economic crisis: Poverty trap for middle classes of Europe

1 February 2012
El País Madrid

Unemployment has hit record levels in the EU, putting nearly a quarter of those Europeans who until now had a decent standard of living at risk of sliding into social exclusion. The phenomenon is undermining the EU’s strategies against poverty.

Dimitris Pavlópulos’s pension is €550 per month. His monthly medical expenses come to around €150. The slash in subsidies for prescription drugs forces him to choose between buying a litre of milk (€1.5) or filling one of the prescriptions for his illness, because he can’t pay for both.

In Greece, the spectre of hunger has become awful reality. Since the first adjustment plan (2010) cut out many subsidies, Mr. Pavlópulos spends his pension in ten days, then falls back on the food and medicines handed out by the NGO Medecins du Monde-Greece.

Manuel G. is one of Spain’s long-term unemployed. He yearns for the €1,000 a month he used to make back when the crisis first hit. Three years ago he lost his job as a clerk, and by now he has exhausted his unemployment benefits. With no family to fall back on, he lives in a rented room, eats at soup kitchens and gets clothing from an NGO.

These are just two of the victims of the crisis. Elements of society that were in the middle classes or lower middle classes just five years ago are today’s new poor. People who must choose between cooking a hot meal or heating the house, between paying the mortgage or making a meal.

They are social cases that destroy the traditional association of poverty with begging. Increasingly, poverty is becoming more and more the norm. “The volunteers of yesterday are our beneficiaries of today,” explains Jorge Nuño, Secretary General of Caritas Europa.

One of every four Spanish children is in poverty

According to the EU, in 2009 there were 115 million people at risk of poverty and social exclusion in the lands of the twenty-seven member states (23.1% of the population) – “not counting another 100 or 150 million on the razor's edge” says Nuno. “Two months of unemployment and carrying a mortgage at the same time can sink anyone.” In 2007, 85 million Europeans (17% of the population) were below the relative poverty line. The list includes countries like Greece, Spain and Ireland, “but also France, Germany and Austria,” Nuno notes.

The examples show how the system breaks down: household debt; the bankruptcies of states that gave out subsidies too freely; and the profusion of casual and uncertain jobs, like the millions lost in the construction sector in Spain.

How is the hardship measured? There are two types of poverty: moderate or relative (60% of the average national income), and severe (40%). “Most of the poor are increasingly found far below this threshold. The poor have become poorer, but it is also true that the soup kitchens are feeding people who never dropped in on them before. The poverty rates have gone up dramatically in children – one of every four Spanish children is in poverty – and quite a lot among immigrants and the young,” says sociologist Paul Mari-Klose of the CSIC.

“We are talking about deprivation, of being unable to make it to the end of the month, or eating meat less than twice a week. In Spain, as in Greece, Portugal and Italy, however, it’s not so much that poverty has spread into new classes, but that it has become more severe and focused in certain groups. During the economic boom many young people struck out on their own prematurely, and now they’re in borderline situations. Iceland has seen a dramatic increase in poverty, especially in children,” Mari-Klose adds.

Lower middle classes have not been in the spotlight

In the Eurostat statistics on poverty and exclusion the crisis is bringing countries like Portugal, Ireland, Greece and Spain closer to eastern European countries that recently joined the EU and to ever broader layers of the populations of stable states and model welfare states that have come down in the world, as in Iceland, due to the collapse of its banking system.

But the EU average on poverty has a high dispersion around the mean. Bulgaria (46.2%) and Romania (43.1%) are almost double the mean, according to Eurostat. At the other extreme are the Czech Republic (14%), the Netherlands (15.1%) and Sweden (15.9%). Spain is in the middle, at 23.4%. But being in the middle ground is to go unnoticed: for Spain the structural risk (in 2007, about 20%), the lack of social protection, and record unemployment (22.8%) all add up to a less than rosy future.

As social spending cuts amplify the effects of the crisis, the four social groups traditionally more exposed to poverty – children, the elderly, women, and immigrants, i.e., age, gender and ethnicity as factors that intensify poverty – are joined by a host of citizens not so easily labelled.

These are “people with a very precarious job, which makes it hard to make ends meet, and on top of that they have no support; people between 30 and 45, with or without family responsibilities, and getting no subsidies because they have some income. If they want to keep paying the mortgage, they’re forced to go back to their parents,” says Joan Subirats, of the Autonomous University of Barcelona. “The other sectors are more closely studied. These lower middle classes, however, have not been in the spotlight,” he adds.

Good intentions on the rubbish heap

The semi-starvation of large sections of European society is not only a social problem, but also has clear political repercussions as more and more citizens find themselves on the margins of the system.

Although most of the experts consulted warn against the temptation to make the “new poor” the only victims of the crisis, and highlight the deterioration in previously impoverished areas, what is undeniable is that after almost fifteen years of good times and new wealth, the crisis has knocked flat part of the population that, until 2007, had their basic needs met.

But there are many more factors at play in the bad dream of the new poor. Among the newest members of the EU, most of which are former communist regimes converted to market economies by forced marches, such as Latvia (a 37.4% risk of poverty and exclusion), Lithuania, Hungary, Bulgaria and Romania, the biggest drag is the inherited structural deficit.

2010 passed almost unnoticed as the European Year for Combating Poverty and Social Exclusion. It thus concluded the Lisbon Strategy, which sought to make “a decisive impact on eradicating poverty,” and got the 2020 Strategy underway. The crisis, though, has left those good intentions on the rubbish heap. The main objective of the Strategy 2020 – to reduce the number of poor by 20 million in this decade – threatens to become a dead letter.

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