Robayo-Abril, MonicaNguyen, Nga Thi VietDelgado, Lukas2025-07-102025-07-102025-05-30https://hdl.handle.net/10986/43448This policy note focuses on the welfare impact of the cost-of-living crisis across EU countries, regions, and sub-populations. The COVID-19 crisis and the spillovers from the war in Ukraine have had asymmetric effects both across and within countries depending on household characteristics and main sources of income. The recovery has been heterogeneous across regions in the EU and across population segments in the 4 EU countries in light of the cost-of-living crisis and expected growth deceleration. There are two key welfare channels affecting households: the employment and the expenditure channel. First, we describe the employment channel by characterizing the more recent labor market trends and the shape of the recovery across subregions and population subgroups for 2019Q3-2022Q3. Since the beginning of 2021, the labor market experienced a rebound in employment in line with the resumption of economic activity on the back of solid vaccination campaigns. Though promising, the headline figure does not accurately depict the differences in the labor market's rebound across countries or employment types. Since much of the inequality prevalent throughout the EU is due to inequality in the labor market, uneven recovery in the labor market has implications for widening income inequality. Second, we describe the expenditure channel: the welfare impacts of rising prices (overall, by regions and across groups) due to loss in purchasing power and impacts on living conditions. Our results show that welfare losses could be sizable, particularly at the bottom of the distribution, with indirect or second-order impacts playing an important role. Finally, given these challenges, we describe what we expect in the medium term and potential policy options to tackle them.en-USCC BY-NC 3.0 IGOPOVERTYINCLUSIONEMPLOYMENTWAR IN UKRAINECOVID-19COST OF LIVING CRISISSPILLOVERSINEQUALITYPolicy NoteWorld Bankhttps://doi.org/10.1596/43448