Europe’s high-taxation and high-welfare model has failed to protect people from the global economic slump and conflicting fiscal measures to tackle the crisis have not been the best response, the European Commission has warned.

The EU’s tax ratio – at 39.8 per cent of gross domestic product in 2007 – is about 12 percentage points above comparable figures for the US and Japan. But this does not seem to have protected the region from the recession, according to the latest annual study of tax trends across the 27-country bloc, which was published on Monday.