The EU’s role in fighting the inequality virus

Rasheda in Chittagong, Bangladesh, has to share a water tap with 25 people and cannot afford basic healthcare.

Rasheda in Chittagong, Bangladesh, has to share a water tap with 25 people and cannot afford basic healthcare. Credit: GMB Akash/Oxfam

Blog by Chiara Putaturo, EU Inequality and Tax Policy Advisor, Oxfam EU
Publicado: 5 Junio 2020

The coronavirus pandemic is a crisis for everyone. All around us people are affected — our loved ones, our neighbours, our colleagues, our communities. The impact on our societies will have profound and lasting consequences. But the existing inequalities which plunge people into poverty and precarious work mean that those already vulnerable are also the ones most at risk. Women, who make up 70% of the world’s unrecognised and underpaid health-workers, are particularly affected. At risk from the virus at work, and increasingly unsafe in their homes as the threat of domestic violence during the pandemic skyrockets.

The health emergency is exposing our broken and unprepared health systems. It is testing our economic paradigm and our values within and beyond the EU. Within EU member states, people with precarious and informal jobs have had to choose between losing their income or putting their health at risk. Care workers and workers in essential and often low-wage sectors have had to continue to provide services to keep society running. Differences in national health systems in Europe, often due to varying levels of investment in the public sector, are impacting effective response.

Half a billion people at risk of poverty

New research published by Oxfam today shows that half a billion people could be pushed into poverty if governments don’t take urgent action on COVID-19 now. In Europe and Central Asia alone, the number of people living in poverty could increase by 6.2 million to 13.1 million.

500,000,000 could be pushed into poverty by Coronavirus

While EU members struggle to contain the pandemic in their own countries, the impact of COVID-19 on developing and crisis-affected countries could be catastrophic. The virus risks derailing the progress made on international development and plunging people everywhere into poverty. EU members must act in solidarity, together — decisive measures now could help save millions of lives.

There is real danger that the post-pandemic phase could exacerbate existing inequalities within and between countries and regions, in the EU and globally, if austerity measures similar to those of the 2008 financial crisis are applied.

We need an Economic Rescue Package for All

The EU can make a big difference in supporting people and businesses, and by deciding sensibly how this support will be paid for. The choices made in the weeks and months ahead will shape society in the next decades.

Ahead of key meetings of the World Bank, the International Monetary Fund (IMF) and G20 finance ministers next week, Oxfam is calling on world leaders to agree an ‘Economic Rescue Package for All’ to keep poor countries and poor communities afloat.

Overcoming the COVID-19 crisis in Europe

While a global response is needed, it is crucial that European leaders get their response right within the EU. At Oxfam, we are convinced that mutualising debt and sharing risk is critical, in order to help all countries in the European Union recover from the current crisis. And there is more that governments and European institutions should do.

The measures taken by the European Commission and the European Central Bank so far (such as the adoption of the escape clause to the fiscal framework, the EC €65 billion of support directed at health systems and vulnerable parts of the economy, the EC €1 billion financial support to incentivise liquidity to SMEs and the ECB asset buying programme) represent important steps in the right direction. It is crucial that these resources reach people and companies in need. Oxfam calls on the EU to develop a monitoring mechanism to make sure resources benefit the most vulnerable parts of the economy and the most affected workers. The resources must not enrich the wealthiest individuals or polluting companies and must directly strengthen essential services like health and social protection in member states.

The European Central Bank has already asked banks not to pay dividends or buy back shares until at least October. Similar and additional recommendations should be extended to the purchase of corporate bonds, asking for responsible schemes such as voluntary country-by-country disclosure, a cap on dividends, bonus and CEOs’ wages, and green investments.

 

Rohingya refugee camp in Cox’s Bazar. The EU must coordinate its action quickly to support people in places vulnerable to COVID-19. Credit: Abbie Trayler-Smith/Oxfam

Rohingya refugee camp in Cox’s Bazar. The EU must coordinate its action quickly to support people in places vulnerable to COVID-19. Credit: Abbie Trayler-Smith/Oxfam

How wealthy countries can fund economic support

The so-called helicopter money from the European Central Bank — quick, sizeable and frequent cash payments to all individuals in member states affected by the crisis — would help people, companies and the economy cope with the decrease in economic activity, support workers’ income and prevent deflation.

To fund their economic stimulus programmes, EU member states should agree on an EU solidarity wealth tax, coordinated in every country to avoid that wealth is shifted from one country to another.

To further increase state income and help fund recovery programmes, EU governments should also agree a financial transaction tax, extended to the most speculative products. In addition, Oxfam calls for strong action against corporate tax dodging so that currently undertaxed businesses pay their fair share. That includes a ban on patent boxes, sanctions against countries offering aggressive tax mechanisms within the EU, an agreement on a global minimum effective tax rate and an immediate coordination on a digital service tax.

 

What the EU can do to help developing countries

Oxfam distributes hygiene kits in Alkehaf Camp, Taiz, Yemen.

Oxfam distributes hygiene kits in Alkehaf Camp, Taiz, Yemen. Credit: Wael Algadi / Oxfam.

While quick and decisive action in Europe is crucial, it’s even more urgent in developing countries. Oxfam has calculated that health spending in poor countries must double immediately to prevent millions of deaths.

Europe’s action has consequences beyond its borders. For instance, the massive purchase of bonds by the ECB can drive speculative flows to developing countries, so there should be mechanisms to stop undue outflows to other economies.

Also, it is high time for the EU to step up its support for developing countries that risk paying the highest price for both the health and the economic crisis.

EU governments have shown that they are able to mobilise billions of euros in no time for their domestic response to the coronavirus emergency. Now, they should increase their development aid and finally reach their commitment to spend 0.7% of their GDP on development — a commitment made 50 years ago.

The EU must act now to save lives and tackle inequality

Rich countries should provide immediate emergency support to the poorest and to the public sector in developing countries, avoiding further privatisation of essential services.

Moreover, it makes no sense for poorer countries to be transferring vital resources to the rich world in an emergency situation. As such, the EU should support an immediate, universal suspension of debt repayment until at least the end of 2020 for Low Income Developing Countries and other developing countries suffering a severe health and economic impact from the COVID-19 crisis.

The EU should build on this moment of unprecedented government action to permanently drive European countries towards a human economy, that radically reduces inequality and leads the fight against climate breakdown.