When I was little my dad read me stories from a fairy tale book, and "The Little Match Girl" reduced me to tears every time. Dad used to say that the point of it was to show how well off we are compared with the little girl in the story. I found the old book recently and, of course, could not resist reading this tale again. It had just the same effect as all those years ago.
I think a lot of stories for children written in the 18th & 19th century seem cruel and warped, but I think that they allow kids to experience identification with others and strong emotions. There is often an element of "not fair" and certainly no happy ever after. Prepares one for adulthood in a certain way.
Second to "The Little Match Girl" I would nominate "Little Red Riding Hood". How could she be so unobservant in the matter of Granny's appearance? Why was she wandering in the dangerous wood alone? How come she had no friends? It seems OK for the nasty wolf to get rid of Granny without any repurcussions. And finally, how come Dopey Red Riding Hood did not go the same way?