Rich Land, Poor Land: The EU’s wealthiest and neediest members

Bulgaria is playing catch-up with western Europe. Super-rich Germany is a different world

Protesters in Sofia. With incomes as little as a tenth of the EU top earners, Bulgaria is the poorest member state, followed by Romania, Croatia, Poland and Hungary. File photograph: Stoyan Nenov

Protesters in Sofia. With incomes as little as a tenth of the EU top earners, Bulgaria is the poorest member state, followed by Romania, Croatia, Poland and Hungary. File photograph: Stoyan Nenov

 

Bulgaria, the EU’s poorest state, is playing very slow catch-up with western Europe. Read our three-part series on wealth in Europe, “Rich land, poor land”, including Derek Scally’s report from super-rich Germany, Daniel McLaughlin’s profile of needy Bulgaria and, below, Patrick Smyth’s assessment of wealth inequality across the union

Income and wealth inequality are at an all-time high in the EU. In the 1980s, the average income of the richest 10 per cent was seven times that of the poorest 10 per cent. Today, it is about 9.5 times higher.

And wealth distribution is even more inequitable – the 10 per cent of wealthiest households hold 50 per cent of total wealth; the 40 per cent least wealthy own little over 3 per cent.

The union’s economic recovery from the crisis of 2007 has not reversed that long-term trend, but it has seen some narrowing of the wealth gap between member states.

On a national GDP-per-capita level, Ireland sits in second place behind Luxembourg, although Irish figures have been distorted by multinational companies’ activities

Ranking the EU’s regions by GDP per capita, inner London comes out on top of the league with three times the European average. It is followed by the Grand Duchy of Luxembourg (266 per cent EU average), Brussels, Hamburg, and Paris (Ile de France), each about double the average.

Forty-one regions exceed 125 per cent of the EU average, eight of them in Germany. They include one of Ireland’s two regions, the “southern and eastern” area. On a national GDP-per-capita level, Ireland sits in second place behind Luxembourg, although Irish GDP figures have been distorted since 2015 by the effect of multinational companies’ activities.

At the other end of the league, with incomes as little as a tenth of the EU top earners, Bulgaria is the poorest member state, followed by Romania, Croatia, Poland and Hungary. The lowest figures were recorded in Bulgaria’s Severozapaden (26 per cent of the EU average).

Last year Bulgarian GDP per capita came in at €8,032, while in Germany the economy generated €44,470 for each and every citizen (Ireland was a dubious €69,331).

Among the 68 regions below the 75 per cent level of the EU average, 15 were in Poland, and seven each in the Czech Republic, Greece and Romania.

Life expectancy at birth is another measure of the social gulf in the EU with Spain top at 82.6 years, the fourth highest in the world, while Bulgarians, Latvians and Lithuanians, at the bottom of the EU league, can expect to live 75 years, or 7½ years less.

“Cohesion” is the policy behind the thousands of projects all over Europe that receive funding from the European Regional Development Fund, the European Social Fund and the Cohesion Fund – the latter is aimed specifically at reducing inequality in member states which have a GDP lower than 90 per cent of the EU average.

In the last seven-year EU budget (2014-2020), some €350 billion was set aside for cohesion measures, about one third of the budget.

The commission estimates that EU investment in 2007-2013 has increased the GDP of the central and eastern European economies of “new” Europe, by an annual 3 per cent for the 2014–2020 budget period.

Central and eastern Europe will be paying for its relative success with sharp cuts in the real value of EU cohesion funding

This – and the fact that the crisis of 2007 hit relatively less hard in eastern Europe – has undoubtedly contributed to significant catch-up of GDP per head in these countries. Countries such as Hungary, Romania, Poland, Slovakia, Latvia, Lithuania and Bulgaria have begun to close the gap between east and west.

If commission forecasts are right, the proportion of those living in regions with GDP per capita of less than three quarters of the EU average will decline from 29 per cent in 2014 to 22 per cent in 2027.

In the 2021-2027 budget round – currently under discussion – the commission has proposed to raise cohesion spending by 6 per cent, but inflation is expected to reduce its real value by 7 per cent. And so central and eastern Europe will actually be paying for its recent relative success with sharp cuts in cohesion funding.

The price of success for Poland, Hungary, the Czech Republic, Estonia and Lithuania will be cuts of 23-24 per cent in their receipts in real terms.

Not surprisingly their governments are fiercely contesting such cuts, suggesting that they are political revenge for the intransigence of some of their number over sharing the burden of migration. Not so, says the commission: that simply is the way the “objective” figures worked out.

Meanwhile, those “old Europe” countries most afflicted by the post-2007 blues will see their allocations rise.

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