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Social protection budgets in the crisis in the EU

DG EMPL Working Paper n. 1 – June 2013
Luxembourg: Publications Office of the European Union, 2013 - ISBN 978-92-79-29813-4 - ISSN 1977-4125 - doi: 10.2767/47

This paper reviews social protection expenditure developments in the crisis, focusing on expenditure trends in volumes following the peak of the crisis (2009), on changes in the distribution of incomes and, notably, on the distributional impact of austerity packages. The significant increase in social protection expenditure in the early phase of the crisis appears to have been broadly in the line with the exceptional severity of this crisis (though there may have been some over-adjustment). Social expenditure thereafter stabilised in 2010, which also appears to be broadly in line with past trends and afterwards declined (in real terms) in 2011 and 2012. The downward adjustment observed since 2011 is significantly larger in comparison with past periods of economic under-performance. It points to weakening of the economic automatic stabilisation function of social protection systems in Europe and EMU, with signs that they were actually pro-cyclical in 2012.
The crisis translated into very different changes in the distribution of incomes in different Member States, broadly reflecting the combination of initial declines in market incomes, automatic adjustments in benefits and taxes levels sustaining households' incomes, and the impact of adjustments in tax-benefit systems since the beginning of the crisis. In particular, the burden of austerity packages has been shared differently across Member States, with varying impacts on the distribution of incomes, reflecting the specific design and mix of measures taken in different Member States.

author(s): European Commission - O. Bontout, T. Lokajickova
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