The Consequences of the Recent Economic Crisis and Government Reactions for Children

During the late 2000s, European countries were affected by an economic crisis considered the most severe since the Second World War. Although the nature of the shock and its evolution were different across countries, the reactions of governments were quite similar. Indeed, governments implemented stimulus fiscal packages in the early stages of the crisis; nonetheless, the worsening of economic conditions plus the pressures coming from financial markets pushed them into a process of fiscal consolidation. This paper shows that these different policy reactions provoked important consequences for people’s living standards. If the increase in social transfers and the reduction of the tax burden partially compensated the drop in private income over the period 2008-2010, the implementation of the austerity packages amplified the negative consequences of the economic recessions. Moreover, the policies implemented by governments during the austerity period deepened inequality. In some countries – such as Estonia, Greece and Spain - the burden of the adjustment fell on the bottom of the distribution producing a deterioration of living conditions for the most vulnerable. Lastly, government interventions worsened the conditions of the poorest children in countries such as France and Hungary.