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INEQUALITY IN EUROPE: UNEQUAL TRENDS
75
chasing power of a Euro is clearly higher in all
poor countries than in the rich EU countries or
in the EU average. This purchasing power com-
parison becomes especially interesting from the
point of view of harmonising living conditions.
Measuring income per head in purchasing pow-
er parities, reduces these differences. In Bulgaria,
for example, it means that income rises up to
€
12,000. The income ratio between Bulgaria
and Luxembourg “improves” to five.
But these considerable differences largely
change, since some countries grow faster than
others. In
Chart 1
, countries are classified from
left to right according to their income per head
in the year 2000. It clearly shows how growth
rates are very different in the last years. The
growth trend was higher in the poor countries,
showing a degree of beta-convergence
1
within
the EU. Nevertheless, the extremely weak growth
in the middle, composed by Greece, Spain,
Portugal, Cyprus and Italy, calls for attention.
The dispersion in the real income per head
has increased from 2000 to 2007 and then
again slightly decreased. This means that the
sigma-convergence happens only to a certain
extent. Indeed, the ratio of income per head be-
tween the richest and the poorest Member
States (Luxembourg and Bulgaria respectively)
has improved from almost 9 to approximately
7.5 (cf. in depth Dauderstädt 2014).
2
For a closer analysis, we can focus on three
groups of countries in the chart and see the dif-
ferences between their growth processes in the
1
A difference is made between beta- and sigma-conver-
gence. Beta-convergence happens within a group (i.e., EU)
when those of its units with the lowest starting level grow
faster than those with the highest starting level. Sigma-con-
vergence happens when the dispersion (standard deviation)
within the group decreases (cf. Dauderstädt, 2014).
2
Dauderstädt Michael:
Konvergenz in der Krise. Europas
gefährdete Integration
. Bonn: FES, 2014.
entire 2000-2014 period, as well as in both the
2000-2008 and the 2008-2014 phases, since
the financial market crisis and the great reces-
sion have led to very different development lev-
els in each case:
– The richer North-West: the twelve countries
that were already rich in 2000 (with an in-
come per head of over
€
20,000 in the year
2000). The founding members of the EU/
EEC and the countries of the 1972 and 1995
enlargements belong to this group.
– The poorer southern periphery: the three
countries of the southward enlargement
(with an income per head of over
€
13,000
in the year 2000).
– The poorer East: the thirteen countries of the
last three enlargements (countries with an
income per head under
€
13,000 in the year
2000), almost all located in Central and
Eastern Europe (CEE). From the income point
of view, Cyprus and Slovenia could also be-
long to the second group.
Until the 2008 crisis, growth rates especially
in Eastern Europe, but also in the Mediterranean
countries reflected catch-up processes that had
reduced inequality between countries as their
growth rates were higher than those in the rich-
er North-Western EU. From 2008 on, the field
splits: While the countries affected by the crisis
in Southern Europe seriously fall behind be-
cause of the public debt panic and the austerity
policies, the catch-up process in the West con-
tinues. Italy and Ireland are two special cases:
– Italy’s growth is particularly weak, which
rather puts it in the group of Mediterranean
countries affected by the debt crisis, al-
though it didn’t need a financial rescue with
the corresponding conditionality. But it
shows high budget deficits, a correspond-
ingly high public debt, and price and struc-
tural competitiveness problems.