The impact of the 2008 economic and financial crisis on the public spending devoted to social protection in the EU

Abstract

This paper analyses the trends of general government expenditures in the European Union. Government expenditure has increased considerably in all industrialized countries since 1870. Although this increase has not been equal in all countries, it is nevertheless remarkable that despite institutional differences, growing public spending has been a general phenomenon. The long-term trends of general public spending in the European Union shows us that, after a short period of decreasing general government expenditure, any external economic shock might significantly increase public spending. During the analysed time periods the highest share of public spending is devoted to social protection. Well-functioning systems of social protection increase spending in times of recession, and scale it back as the economy recovers, therefore the welfare state can operate as an effective “automatic stabilizer”. The paper also tests which EU member states’ welfare systems have been able to function as an automatic stabilizer.

Keywords

• general government expenditures
• social protection
• automatic stabilizer function