World Bank: EU income inequalities provide ‘fertile ground for populism’

Growing income gaps within EU countries threaten to stoke political discontent and tarnish the success of a narrowing gap between the bloc’s richer and poorer states, the World Bank’s chief executive has warned.

Technological change is delivering more jobs for skilled workers in booming urban areas but shutting out less educated employees outside main cities, said Kristalina Georgieva.  The former European commissioner insisted the failings could be tackled but pointed to the potential damage caused by diverging regional fortunes in both old and new EU member states.

“If left unattended the risk is right there that people feel disenfranchised, disillusioned and left behind,” she said in an interview. “There will be fertile ground for populism — not necessarily for [politicians] who come up with solutions, but people who come up with the right slogan diagnosing what the problem is.”  Ms Georgieva was speaking ahead of the release of bank research that underscores how convergence between EU countries masks growing inequalities within them.

Poorer EU countries have closed the gap with richer ones amid waves of enlargement to the south and east since 2000, but some in-country inequalities have remained unchanged or even grown, the report says. Poland’s per capita GDP has risen from half the EU average in 2000 to 69 per cent in 2015 — but regional income divisions have increased.

“Our diagnosis is that the convergence machine of the EU is still working — but it’s not working for everyone and there are signs of growing divides,” Ms Georgieva said. “Low-income Europeans are falling behind in the labour market across much of the EU. If this is not addressed, there will be a growing inequality with all the consequences of that.”

While technological advances have boosted the numbers of creative and analytical jobs by 15 per cent over the past 15 years, manual jobs have fallen by the same amount, the report says. The disappearance of manual jobs has been particularly fast in Bulgaria, Italy, Greece, Romania, Slovenia, Hungary, Latvia and Austria.  The report calls for a focus on education failings that have made it harder for those who have lost jobs to take advantage of opportunities.

More than 30 per cent of 15 years olds fall short of basic literacy standards in Bulgaria, Romania, Greece, Malta and Slovakia. The figure exceeds 20 per cent in some western European countries including France.  Falling productivity growth has also held back economic expansion across the continent and been particularly steep in southern Europe, where onerous regulations in some countries have stifled growth and investment, the report adds.

Financial Times