OECD Economic Surveys: European Union 2018

OECD

• Publisher: OECD
• Year: 2018
• eBook ISBN: 9789264304758
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

Key Policy Insights

• The economic expansion continues
• Time is ripe for a reform of the EU budget
• Addressing regional divides
• Deepening the single market
• Strengthening labour markets
• Fighting climate change

Challenges facing the European Union

After years of crisis, a positive economic momentum has taken hold in the European Union over the last couple of years, helped by very accommodative monetary policy, mildly expansionary fiscal policy and a recovering global economy. Growth has continued at a dynamic pace in 2017, broadening across sectors and countries and lowering unemployment.

These positive developments provide an opportunity to renew efforts to meet the long-term challenges facing the European Union. Sustained improvements in living standards are held back by weak productivity and investment in many countries. Europe’s rapid ageing will lead to a decline in output per capita and squeeze public finances, unless employment rates and productivity increase. The short and medium term economic impact of the UK departure from the EU (“Brexit”) on the EU has been estimated to be relatively small (Kierzenkowski et al., 2016), but some short-term disruptions cannot be ruled out. Migration remains an important concern for Europeans. The numbers of refugees entering the EU have come down, but the latest wave of refugees has shown the limitations of the EU policy. An additional challenge, discussed in the accompanying Euro Area Survey, is how to put the economic and monetary union on a stronger footing to make the euro area less vulnerable to crises.

In view of these challenges, the EU needs to show more than ever the concrete benefits it brings to people. Citizens’ trust on the European Union is on the rise, after having significantly fallen during the sovereign and refugee crises, but the popularity of the EU remains strikingly low by past standards (Figure 1). Part of this discontent stems from significant gaps in well-being among EU citizens in key areas including income, jobs, health and education (Figure 2). Income inequality is lower in Europe than in other OECD countries, but the crises have left a legacy of social problems. Unemployment remains above pre-crisis levels in many countries and is painfully high in some others (Figure 3), especially among young people. Real wages have stagnated or barely grown in most countries, and have fallen significantly in countries hard hit by the crisis. There are also significant regional divides across Europe. While leading European regions, mostly cities and major urban areas grow ahead, lagging regions seem to stall (OECD, 2018a; Bachtler et al. 2017).

Figure 1. Trust in the EU is recovering, but remains below pre-crisis levels

Respondents claiming they tend to trust the European Union, as an institution, in per cent of total respondents

1. Unweighted average of Greece, Italy, Portugal and Spain.

Source: European Commission, Public Opinion in the European Union, Standard Eurobarometer Survey.

StatLink http://dx.doi.org/10.1787/888933747546

Figure 2. Average well-being is high, but there are significant inequalities

Better Life Index, 20171

1. Each well-being dimension is measured by one to four indicators from the OECD Better Life Index set. Normalised indicators are averaged with equal weights. Indicators are normalised to range between 10 (best) and 0 (worst) according to the following formula: (indicator value - minimum value) / (maximum value - minimum value) x 10.

2. European Union member countries that are also members of the OECD (21 countries).

3. The panel shows well-being outcomes in various dimensions for people in the European Union with different socio-economic background. In the dimensions of "income and wealth", "health" and "civic engagement and governance", “high (/low) achievers” are people with an income belonging to the top /(bottom) quintile of the income distribution; in "jobs and earnings", “high (/low) achievers” are people with the high/(low)est educational attainment (i.e. ISCED 5/6 versus ISCED 0/1/2) or with gross earnings belonging to the top /(bottom) quintile of the distribution; in "education and skills", "high (/low) achievers” are people with a score belonging to the top /(bottom) quintile of the...

Table of contents

• Title page
• Legal and rights
• Introduction
• Executive summary
• Key Policy Insights
• Annex. Progress in main structural reforms
• Thematic chapter
• About the OECD