1. A Cautionary Tale: the true cost of inequality and austerity in Europe
- I welcome the opportunity to address you here.
Was not supposed to be here so not well prepared but will try do my best :
we know the impacts of austerity,
we have been there before
so we should learn the lessons from the history
because there are alternatives to austerity.
16 November 2018

2. Overview
Austerity for whom?
We have been there before
The future under austerity
There are alternatives

3. 1. Austerity…for whom?
The EU economic recovery plan vs. aid to the financial sector
Exactly 5 years ago, Lehman & Brothers melted and a financial crisis waved through the world.
To save Europe’s banking system, an unprecedented bailout of banks and other financial institutions began.
Between 2008 and 2011, the European Commission approved €4.5 trillion in aid to the financial sector (equivalent to 36.7% of EU GDP)
European Economic Recovery Plan (ERP), at a total cost of €200bn across the EU (1.5% of EU GDP)
This ultimately led to the accumulation of huge public debts.
But, what caused the vast majority of the debts that EU countries are currently servicing?
Looking at this figure, it is not difficult to see: it was the bailouts to financial institutions rather than these stimulus measures.
Then, austerity measures were introduced to balance the books following the bank bail-out

4. 2. We have been there before
It could take up to 25 years to regain living standards prior to the economic crisis
History is repeating itself.
Remember the structural adjustment programmes in the 80´in Latin America and Sub-Saharan Africa as well as the response to financial crisis in South East Asia in the 90´. They also got the same
It was a very similar receipt of the current austerity measures: a medicine that sought to cure the disease by killing the patient.
They were not effective in ending the crises and they had long-term negative impacts with poverty levels going back 20 years.
Basic services, such as education and health, were cut or privatized, excluding the poorest and hitting women hardest. As a result, the gap between rich and poor widened.
In LA, poverty increased from 40 to 48% in 10 years. It took 25 years to bring poverty back to pre-crisis levels.
In Indonesia, the number of people living below $2 a day rose from 100 million in 1996 to 135 million in 1999, GDP declined by 15 per cent in one year, and it took over 10 years for poverty to return to pre-crisis levels.
But you wonder, the situation in these regions was different from Europe.
Indeed, but we are seeing very close parallels in terms of inequality

5. 3. The future under austerity
Austerity = more poverty
What are the lessons that we need to learn?
How does the future looks like if austerity continues?
1) Austerity means more poverty:
- By 2025, almost 1 in 3 people could be living in poverty
Wages are falling fastest in countries facing the harshest austerity prescriptions.
Almost one in ten working households in Europe now live in poverty and it could get much worse.
For eg the real value of wages in the UK is now at 2003 levels= a lost decade for the average worker.
For example, tough mortgage laws in Spain let banks to evict 115 families from their homes every working day.
Even those in work will be significantly poorer than their parents.

6. 3. The future under austerity
Austerity= more inequality
Gap in the UK & Spain could be the same as in South Sudan or Paraguay
2) Austerity means more inequality
Some countries have already experienced an increase in inequality since the implementation of austerity policies.
In 2011, we already saw that the richest 10 per cent took home 24 per cent of all the income in the EU while the poorest 10 per cent took only a 3 per cent.
If the Greece, Ireland, Italy, Portugal, Spain and the UK saw an increase similar to Bolivia (16% in its net income inequality over 6 years following its SAP in the 90s) their net inequality (after taxes and social transfers) would rise make them amongst the most unequal in the world-similar to South Sudan and Paraguay.

7. 3.The future under austerity
Austerity = failed to reduce debt
Government debt as a percentage of GDP (2008 – 2013)
3) Austerity fails to reduce debt.
Austerity as an economic policy was designed primarily to reduce budget deficits, in order to restore market confidence and ultimately lead to job creation, growth and lower debt levels.
Austerity is failing on its own terms – increasing deficits in some countries and raising debt levels – let alone in terms of the huge, unevenly distributed human costs.
Many EU countries have seen their debt-to-GDP ratios increase over the last years.
At the same time, deficits have not fallen fast enough, leading to extension of deadlines and a downward spiral of weak or negative growth.
We have seen some “green shots” but if European leaders don’t change course, a big chunk of the population, particularly the most vulnerable, will be left behind. Reducing inequality is vital to make sure that all of us, including poor people, share in the proceeds of growth

8. 4.There are alternatives
Invest in people and sustainable economic growth
Investing in public services
There are clear alternatives to the current policy of austerity.
European governments must champion a new economic and social model that invests in people &sustainable growth, strengthens democracy and pursues fair taxation.
 - Investing in people and economic growth:
• prioritize stimulus programme & employment;
• protect aid budgets.
- Investing in public services:
• education & health care and develop social protection systems that enable the most vulnerable to live with dignity and lift themselves out of poverty.

9. 4.There are alternatives
Strengthening institutional democracy

10. 4.There are alternatives
Building fair tax systems
Building fair tax systems:
• implement progressive taxation reforms, including a tax on wealth stocks and a Financial Transaction Tax;
• tackle tax avoidance and evasion, including transparency and exchange of financial information, new international tax rules listing tax havens.

11. 4.There are alternatives
-That all sounds great, but where are we going to find the money to pay for this?
- Governments could raise billions for public services, such as health and education, by taxing the wealthiest and cracking down on tax dodging.

12. The report and 12 country cases
Ask to the IMF: not only soften austerity policy but get rid of them.
Thank you for your attention
and I hope the message will stay with you:
We need to learn the lessons and there are alternatives to austerity!
overall we say that we need an stimulus package, thus investing more rather than doing cuts as it was done from 2008 until However, ihow to get out of the crisis is under debate by economists. f there is an economic decision to restricti spending, it should definitely not affect the social spending but military or other budgets. The solution is better tax justice ;taxing more the richest rather than taxing everyone eg TVA, hope it helps