The beginning of the European crisis
Having suffered the worst financial and economic crisis of the last 80 years, Europe took decisive action to improve its public finances, push through deep reforms, and establish new institutions to manage and prevent crises better. The changes are structural, long-lasting and make Europe more competitive.
The global crisis hit Europe twice. The first strike came from abroad in 2007. In the United States, markets had ignored credit risk in subprime mortgage markets. A lack of financial supervision allowed opaque financial instruments to flourish, aggravating the problem. As a result, the U.S. banking system underwent a dramatic bail-out in September 2008. European banks suffered in the fallout. Two years later, a second crisis erupted in the euro area. Years of unsustainable government policies had caused deficits and debt burdens to mushroom and bloated pre-crisis wages and housing prices. As the situation worsened, Europe took courageous decisions to put the continent back on firm footing.
2.1 Five key responses combined to steer Europe out of the crisis
2.2 And the results?
The crisis-hit countries implemented radical reforms. They now head multiple international rankings, earning the sobriquet ‘reform champions’. Many of Europe’s crisis countries – Greece, Ireland, Portugal, and Spain – ended up in the top five of 34 OECD members (a club for the most developed countries) in recognition of their structural reforms. They did so by improving their public finances, reducing deficits, and cutting labor costs to make themselves more competitive. The euro area outperformed the US, Japan and the UK in fiscal terms: the aggregate euro area budget deficit was significantly smaller than these three peers. And finally, some of the crisis countries are becoming growth leaders. In 2015, Ireland hit a record high 6.9% GDP growth and Spain 3.2%. Ireland’s growth matched China’s, while Spain’s is almost a third again as high as the US’s (2.5%) over the same period. These are extraordinary achievements.
3. Austerity and health in Europe
Many European governments have abundantly cut down public expenses on health during the financial crisis. Aftermaths of the financial downturn on health outcomes have begun to arise. This recession has led to an increase in poor health status, hoisting rates of anxiety and depression among the economically vulnerable.” In addition, the incidence of some communicable diseases along with the rate of suicide has increased significantly. The recession has also driven structural reforms, and affected the priority given to public policies.”
The current economic climate, while challenging, presents a chance for reforming and restructuring health promotion actions. More innovative approaches to health should be developed by health professionals and by those responsible for health management. In addition, scientists and experts in public health should promote evidence-based approaches to economic and public health recovery by analyzing the present economic downturn and previous crisis. However, it is governance and leadership that will mostly establish how good health systems are prepared to face the crisis and find ways to decrease its effects.
3.1 Austerity Measures and the Risks to Children and Women
Austerity measures may have adversely affected children and women, in a sample of 128 developing countries in 2012.It relies on „International Monetary Fund (IMF) fiscal projections and IMF country reports to gauge how social assistance and other public spending decisions have evolved since the start of the global economic crisis.” It was shown that most developing countries amplified total costs during the first phase of the crisis (2008–09); but beginning in 2010, budget contraction became widespread, with ninety-one governments cutting overall spending in 2012. Moreover, it was demonstrated that nearly one-quarter of developing countries underwent excessive fiscal contraction, defined as cutting costs below pre-crisis levels. Governments considered four main options to achieve fiscal consolidation – wage bill cuts/caps, phasing out subsidies, further targeting social safety nets, and reforming old-age pensions – each of which would be likely to have a disproportionately negative impact on children and women.