We have a saying in Portugal: “things are bad, things are very bad”. It is something I have heard for as long as I can remember. Except now, things really are bad and Portugal is in a state of crisis. In fact, nearly all southern European countries are in a state of crisis. The rest of Europe, and indeed the world, call us PIIGS – Portugal, Italy, Ireland, Greece and Spain. Forgetting about Ireland for the moment, if the witty inventors of this nomenclature think this is supposed to make us feel bad about ourselves and see the error or our ways then obviously they don’t know southern Europeans very well.
It all started in 2009, when Greece admitted to lying about the size of its debt for years (not Greece per se, but a new government that had just been elected and was eager to prove itself better than the previous one). The country had incurred in 300 billion euros of debt! This was the highest in modern history, amounting to 113% of the country’s GDP. So began the snowball that would drag 3 other European nations with it (to date). Less than 6 months later the IMF (International Monetary Fund) intervenes in Greece, providing it with a bailout package of 100 billion in the hopes that it would plug the country’s financial hole. Unfortunately, as we all know, that was not the case, not by a long shot. In the following months the euro plummeted and the economies of the remaining PIIGS countries worsened. In the same year Ireland receives a bailout of 85 billion, followed by Portugal (the country of yours truly!) in May of 2011. Roughly a year later Greece receives a second bailout of 130 billion, after getting the biggest debt write-down in history. More recently Spain has been in the spotlight and there is rumor that it will be the next one getting financial aid.
Although my country received the smallest value, a mere 78 billion, we were by no means better off than the other “rescued” countries. Austerity measure after austerity measure was passed to increase revenues and cut spending. Not surprisingly, this lead to economic recession, rise in unemployment and overall population unrest. All over Europe people started to protest against these measures and their “corrupt governments” that, for the most part, still had the same benefits as before the crisis (private car and driver, paid living expenses and all that). This is always the expected reaction. People don’t like to see others better off when they themselves are struggling to pay their bills, so they protest. They shout and they get angry while the politicians keep saying to just hang in there and that things will eventually improve.
However, in the case of Portugal, people didn’t get angry or shouted, they just complained more than usual and didn’t really do much besides a few moderate strikes. That all changed a few weeks ago when 600.000 people took to the streets in the main cities for a series of protests that were, for the most part, quite peaceful. What happened? The government approved another tax raise after it said there was no more margin to raise them (it recently approved yet another relatively moderate tax raise). It will be bad there for the next couple of years, but the truth is, we had it coming. Years of bad governing and of rulers thinking the people’s money is theirs to spend as they please coupled with the complex interdependence of the different economies have created this situation.
Why is it then that southern Europeans (and Ireland) are so bad at following rules? I used to think this was solely due to the weather. The Mediterranean scent combined with Africa’s hot air created the conditions for us southern Europeans to become generally relaxed and complacent which over the years led us to become more content with corruption than other countries. While this still makes sense to me, recently I heard of another factor from one of my lab mates. He has a very interesting theory on the relation between Catholicism and corruption that may provide a different perspective on the subject. Maybe he can tell you all about it in a future blog post.
In any case, drastic measures need to be implemented, otherwise we are doomed to rehash the debt cycle over and over again. The current measures being “forced” on the territories in crisis seem to suggest a desire for stronger unity in Europe, a return to the original ideal that spawned the European Union. As we all know, this dream of a “federal europe” never really came true. In my opinion it never will, at least not in the way it was originally intended, which was to structure the continent in a way that would be similar to the United States. That is because of a fundamental difference between our two territories: unlike America, which was formed, at least in its present form, over a relatively short period of time, european nations have existed for a long time. Some of them for more than a millennium in fact (even more if we consider ancient Greece). Two world wars and many internal conflicts have shaped the European peoples and the relations between them. Over time, we accumulated character traits, pet grudges and cultural trends that do not go away unless some strong force does away with them, which is precisely what is happening today. These “economic forces” that are motivating structural reforms in many nations are in reality trying to change people’s habits and mindsets.
Despite all the reaction to these forces, I think this change is needed and, with the current model of global economics, it was only a matter of time before it happened. Today’s frantic pace of the world is too fast to be sustainable. While I don’t agree with some of the individual measures, because they will likely bring many hardships in the short to medium run, overall they could bring in a new era of prosperity. And who knows, it may even give rise to a new dream, not of a federated Europe but of a “united world”.
http://www.bbc.co.uk/news/business-13856580
– Joao Moreira