War in Ukraine likely to exacerbate the longer-term structural problems in the European Union
Posted on Monday, 31 July 2023
‘Europe from Pandemic to Polycrisis’ examines recent social developments in Europe against the backdrop of recovery from the Covid-19 pandemic and the outbreak of war in Ukraine. The report, a part of Social Justice Ireland’s research series, examines the impact of the war in Ukraine on EU social policy. It finds that while the conflict has seen Common Security and Defence Policy rise dramatically up the EU’s agenda with initiatives such as the European Peace Facility and Strategic Compass, the war has also wrought complex and potentially long-lasting effects on other dimensions of European integration, not least across the interconnected areas of social justice, migrant solidarity, social rights and redistribution.
Social impact of war in Ukraine on Europe
One of the main social impacts of the war in Ukraine is its impact on people and the the displacement of approximately 8.2 million refugees across Europe of which over half reside in the EU under the 2001 Temporary Protection Directive. This directive is an emergency mechanism which was activated last March, and it provides displaced persons with rights of legal residency, free movement and access to the labour market and public services across EU Member States. The swift and effective EU response to the plight of Ukrainian refugees stands in stark contrast to the approach adopted during the 2015-16 migration crisis when profound disagreements between Member States paralyzed EU asylum policy to the detriment of hundreds of thousands of predominantly non-European migrants fleeing war.
This potential reframing of EU social Policy in more progressive directions as a result of the Temporary Protection Directive is to be welcomed. As is the decision of the European Council in March 2022 to allow 17 billion euro of EU cohesion funds to be redirected to support the national rights associated with temporary protection –areas such as housing, education, healthcare –representing a significant budgetary precedent. However, there are signs that the EU Pact on Asylum and Migration for 2024 may backtrack on the current provisions around social rights for asylum-seekers’, with consequent implications for social rights as a whole across the EU. This is a cause for concern.
Economic impact of war in Ukraine on Europe
The report also finds that the war in Ukraine is likely to exacerbate the longer-term structural problems of inequality, in-work poverty and child poverty which have dogged the European Union for many years. Outside the devastating humanitarian impact of military aggression within Ukraine itself, Europe has primarily felt the effects of the war on two fronts: rapid price inflation and an unprecedented influx of refugees fleeing the war. Rapid price inflation has been primarily driven by significant rises in energy prices following a sharp reduction of European imports of Russian natural gas and oil. Combined with post-pandemic supply-chain bottlenecks from 2021, the war contributed to a contraction of 0.1 per cent in the EU economy in the final quarter of 2022 and unprecedented inflation rates peaking at 11.5 per cent.
This has manifested itself in energy-specific inflation rates as high as 38.7% last year and food price inflation hitting 16.5% in February of this year. Looking at the impact of this at a household level, we see that financial distress of households (the need to draw on savings or to run into debt to cover current expenditures) is running at high levels and stood at 16.8 per cent of the overall population in February 2023. However, looking at those on the lowest incomes, 28 per cent of these households are experiencing financial distress. The combined impact of this price shock, and a decline in real hourly wages of about 7 per cent across the Eurozone implies that the economic impacts of the war are likely to exacerbate the longer-term structural problems which have dogged the EU economy since the 2008 crash and which were worsened by Covid-19, namely stagnant or widening inequality, in-work poverty, child and elder poverty and youth unemployment.
Summary of some key findings*
Inequality in the EU:
13.3 million people unemployed;
4.8 million people long-term unemployed;
2.75 million young people aged under 25 unemployed (highest in Greece, Spain and Italy);
73.7 million people living in poverty (over 2.2 million more people than in 2010) - of whom over 15.7 million are children (one fifth of Europe’s children are living in poverty).
Close to one-in-ten employed people in the EU live in poverty on an ongoing basis.
In 2021, 8.9 per cent of employed people (aged 18+) were living under the poverty threshold (EU-27) and it has been at similar levels since 2014. The average rate has increased since 2008, when it had been 8.6 per cent. Getting people into work is not always sufficient to lift them out of poverty.
The highest rates occurred in Romania (15.5 per cent), Luxembourg (13.5 per cent), Spain (12.7 per cent), and Italy (11.6 per cent).
The lowest rates occurred in Finland (2.8 per cent) and Czechia (3.5 per cent).
Close to one-fifth (19.5 per cent) of children in Europe (15.7 million) are living in poverty.
In 2021 the highest rates were in Romania (29.8 per cent), Spain (28.9 per cent), Luxembourg (27.8 per cent), Italy (26 per cent) and Bulgaria (24.2 per cent) followed by Greece and Portugal.
Rates were lowest in Finland, Denmark and Slovenia (all between 9 and 10.5 per cent).
Poverty tends to persist over time and be transmitted across generations, which means that children born into poverty bear a higher risk of poverty in adult life than the average population. In 2018 almost 70 per cent of adults with a low ability to make ends meet grew up in a household in the same situation.
*all figures relate to 2021 for EU-27 comparison purposes
Social Justice Ireland view
Investment policy at EU level must commit to rebuilding a social Europe capable of addressing the complex legacies of the past as well as the myriad challenges of the present. At a time of compounding and unprecedented shocks – an apparent ‘polycrisis’ of social, ecological and geopolitical dimensions – the European Union must heed the lessons of its own recent history. The European Union continues to suffer from social and economic wounds sustained a decade and a half ago. Substantial and coordinated action is required. It must be built on investment in our social and human capital - protecting people across the lifecycle, young and old, men and women, those with an income and those with no incomes.