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A new EU report has warned of a growing poverty gap in Europe.

The European Commission’s annual Employment and Social Developments review shows the continent is increasingly divided.

The latest figures from 2011 show the south to be the worst hit by unemployment, but a far better economic situation in northern European countries.

EU officials admit that the pace of austerity may have to be slowed.

“It is true that social policies alone will not be able to improve the social situation in the southern European countries,” said Laszlo Andor, European Commissioner for Employment.

“The stakeholders which are involved in the troika, but also in broader terms, need to work together for that, that might require more flexibility than in the past in terms of deadlines, in terms of speed and the composition of the consolidation’s measures,” he told euronews in Brussels.

More people out of work means less tax revenues for EU governments.That in turn means there is less money available to spend on welfare.

Some of the EU’s most indebted countries have seen household incomes slide dramatically over recent years.

Anti-poverty campaigners argue the depth of the current crisis shows the need for a Europe-wide benefits system to help those who are out of work.

“This could be a really good way for the EU to show that is doing something for the people,” said Sian Jones, a policy coordinator with the European Anti-Poverty Network.

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