Mon June 18, 2012
Personal Stories Behind Europe's Fiscal Instability
Originally published on Mon June 18, 2012 11:26 am
NEAL CONAN, HOST:
This is TALK OF THE NATION. I'm Neal Conan.
Financial markets did not get to celebrate the Greek election for even one business day, even as a pro-euro, pro-austerity candidate tries to form a new government in Athens, interest rates on Spanish government bonds spiraled up to alarming heights in Madrid, and now there are fears Italy will be next. Los Angeles Times columnist Doyle McManus wrote that to Americans, the financial news from Europe can often seem bloodless. But to the people he spoke with on a visit to Italy and Spain, pain is everywhere.
We want to hear from the Europeans in our audience: What reports are you hearing from home? 800-989-8255. Email us: email@example.com. You can also join the conversation on our website at npr.org, click on TALK OF THE NATION. Doyle McManus is Washington columnist for the Los Angeles Times, and he joins us here in Studio 3A, back after three weeks in Southern Europe. Welcome home.
DOYLE MCMANUS: Thank you, Neal.
CONAN: And what do you mean by pain is everywhere? Can you see it?
MCMANUS: Well, yeah. Actually, you can see it because in some parts of Southern Europe, Spain especially, unemployment is really at dizzying numbers. Unemployment overall in Spain is at about 24 percent. Unemployment among young people is over 50 percent. These are numbers we didn't hit here in the depth of our recession. So yes, in the squares of cities in Spain and Greece where unemployment is at comparable levels, you can see it. Harder to see in places like Italy where the unemployment rate is at a relatively civilized 10 percent.
But go talk to a small businessman, go talk to someone on a fixed income, go talk to anyone of modest means who is looking at tax increases and you'll hear a lot of pain. So in a way, a trip to Southern Europe these days is like a trip back to the United States or back to Florida and Nevada in the bad, old days of 2009.
CONAN: And obviously when things were very, very bad here. But what are these people telling you when they say the pain, tax increases in Italy?
MCMANUS: Sure. I mean, there's a combination of things. And part of Europe's problem, of course, is that we're not looking just at one simple economic crisis. We're looking at five different crises. They're in different measures and different places. You know, in Spain and in Ireland, you've had a terrible real estate boom and bust. So it really is like Nevada and Florida. In Italy, you have a government paralysis, a big debt and a deep, deep recession. Growth is negative in Southern Europe, not positive.
You know, in other places, you have other combinations. In the countries where austerity plans are being pushed - Greece, Spain, Italy - what you have is government workers being laid off, government spending going down, taxes going up. Well, that's an austerity program, and the problem with austerity is it's austere. It's not about growth. And so I talked with a business consultant in Italy to try and get a sense of what it's like in the private sector, and he said, look, you know, the problem is that kind of depresses everyone's outlook.
Entrepreneurs start aiming lower. People figure - even kids coming out of college figure that their horizons are going to be shrinking. And that's one of the reasons you've had a political revolt across most of Europe against the austerity program.
CONAN: Every election, it seems, I guess - possibly with the exception of this most recent one in Greece, the incumbents get thrown out.
MCMANUS: Yeah. And in Greece, there sort of were no incumbents. Greece has been in chaos for so long it's hard to figure out who the incumbents were, although, in fact, the government presiding over a lot of this was the Socialist Party and they are out. That's exactly right. Voters are revolting against - if a conservative party is in power, as was the case in France, that party gets thrown out. If a liberal or a socialist party was in power, that party gets thrown out.
In Italy, both sides have been discredited, and the fastest growing political movement is one lead by a comedian, a stand-up comedian named Beppe Grillo, who is sort of the Michael Moore of Italy, and his slogan is throw all the bums out. And that really is the best capsule description of the state of European politics today.
CONAN: And that's amusing, but then you get new dawn in Greece, which is openly neo-Nazi.
MCMANUS: Well, that's right. You have a phenomenon. I mean, it's far too early to use the N-word, that Nazi word, in relation to what's going on in European politics except that - here's the parallel - the traditional political parties, which have not managed this process well, and there is still a governance crisis going on in Europe about who's going to fix this problem, the traditional parties are being discredited across the board. And so you have lots of new forces coming to the fore. That doesn't mean they'll be of the extreme right. In Greece, the second-place party and the party that almost won that election was a left-wing party that wanted to pull out of the austerity plan.
CONAN: And is the idea of Europe coming into question, this idea that inevitably these countries would grow more closely together, that Brussels will take over, there will be a sort of United States of Europe with fiscal policies set up from a central source?
MCMANUS: Yes, but it's not a coherent revolt against that idea because then there are others, including Angela Merkel, the chancellor in Germany, who says the only answer to the problem is more Europe. One of the surprises to me was I expected to find a lot of resentment of the Germans. Here are the Germans telling us how to run our affairs. Actually, that's not where the resentment is. And there was some interesting polling that the Pew Research Center did, which found, in fact, even in Spain and Italy and most of Southern Europe, people largely admired the Germans. And if they thought it would work, if they thought the German prescriptions would work, they'd sign up for them. It's no so true in Greece where they're feeling more pain.
Where the anger is directed is against the bankers because people see lots of money being taken out of their pocket, out of their economy to bailout bankers and what this is like. The best analogy I came up with for Americans is, you remember, when we went through TARP and the bailout of the Wall Street banks, and we all hated that. Everybody on every side of the political spectrum thought, you know, this is really rotten, but we're stuck with it. Well, we had to go through that for about a year. Europe has being going through that for more than two years. Bit by bit, they've been doing TARP in slow motion and they're not done yet, and they hate every step of it.
CONAN: Now, what's its like to live in Europe today? Give us a call: 800-989-8255. Email: firstname.lastname@example.org. You mentioned slow motion. There's also this idea that after the TARP bailout, there was the stimulus package put forward by President Obama. They're talking about stimulus right now in Mexico City where the Group of 20 is meeting. It includes, of course, a lot of these big European countries.
MCMANUS: And the iceberg is slowly breaking in Europe because, initially, the approach in Europe led by Germany, which has the money and so, in effect, controls the first strings, Angela Merkel and her conservative party don't want to bailout the rest of Europe. So theirs was an austerity program. And that was also true of David Cameron in Great Britain even though Britain isn't in the eurozone.
The pain has been so intense, including in Germany and Britain, that those governments are wavering on that. And so now everybody is talking about some way to combine growth and austerity, in a sense, in the same way that the Obama administration, that the American political dialogue has struggled to combine the idea of some stimulus followed by budget tightening. In Europe, it's the other way around, belt tightening followed by a little bit of loosening up of stimulus someplace or another because they desperately got to get some growth going somewhere.
CONAN: Well, both Cameron and Merkel find themselves in somewhat awkward positions. The most pro-European parts of those countries are the opposite party. It's labor in Britain. It's the liberals in Germany as well. So they find themselves at risk of losing support within their own party even though Merkel remains popular in Germany.
MCMANUS: That's exactly right. And so they are getting caught, in effect, both directions, and for Angela Merkel in particular to suddenly start talking about, well, we can afford a little more inflation. That doesn't sit well with German conservatives at all for very good reasons.
CONAN: There was one Italian management consultant you spoke with who tried to offer a little comic relief. It's so bad, you quote him as saying, to save money, they've turned off the light at the end of the tunnel.
MCMANUS: Yeah, there's a lot of black humor in the financial districts in Europe these days. I got to tell you that after that my management consultant friend in Milan read the column, he sent me an email saying, hey, it was only a joke. I do think there's a light at the end of the tunnel. But he couldn't tell me where it was.
CONAN: Is there a light - I mean, the future as you say is feeling so constricted, especially for young people who are out of college or out of high school and have nothing to look forward to.
MCMANUS: Well, you know, the future really lies in this set of mind-numbing but rolling European summits over the next few weeks, the one that's going to be in Brussels later this month followed by whatever bailout happens after that. Europe should work its way out of this recession inevitably and inexorably and slowly, just as any free market economy or set of free market economies should by all the rules eventually work its way out. It's just taking so darn long.
CONAN: And they dodged a bullet in Greece, but there are more shells coming.
MCMANUS: Yeah. And, look, Greece - 2 percent of the European economy, economically speaking, was only a sideshow. The problem of Greece was two-fold. One, if Greece ended up leaving the euro, being kicked out of the euro or collapsing out of the euro, then the principal that the eurozone is inviolable gets broken. And you have this terrible specter now, which is the real one, of a run on the banks, of people pulling their money out and putting it in safe places.
CONAN: Well, there is a slow-motion run on the banks.
MCMANUS: And that's going on. It's going on Spain, it's going on in Italy, it could go on in France, and they're out not out of the woods yet on that one at all.
CONAN: And the governance crisis, you say, well, let's take quick, decisive action to reverse some of these policies. In Europe, you cannot take quick decisive action.
MCMANUS: You can't take quick decisive action. You have a European Central Bank that has less power and less quickness and decisiveness than our own Fed. There's no Ben Bernanke in Europe. That's one of the big differences. And there's no Ben Bernanke in policy terms. The European Central Bank is there to be tightfisted and conservative, not to do quantitative easing.
CONAN: We're talking with Doyle MacManus, Washington columnist for the Los Angeles Times. His piece, "All Pain, No Gain In Southern Europe," ran last week in the Los Angeles Times. You're listening to TALK OF THE NATION from NPR News. So what's it like living in Europe today? 800-989-8255, email us: email@example.com. And Ricardo is with us from Greenville in North Carolina.
RICARDO: Hi. Good afternoon.
CONAN: Good afternoon.
RICARDO: How are you?
CONAN: Good. Thank you.
RICARDO: Well, the only thing that I was calling about, I don't have any specific stories, but one of the things that we have been talking with family and friends is that apart from the hardship of the measures of the - economic measures is that something that we feel that's very, very important is that a sense of democracy has been stripped out of the people. In Spain, it really doesn't matter who you are voting for or who is elected. The austerity measures that are in place are coming from someone else, and someone who has not been elected in Europe or let alone Spain. So that's one of the things that we have been struggling, and we are very worried about that. It doesn't really matter or we don't - people do not have the power to elect their representatives.
CONAN: And the - so the policies are coming from Berlin or Brussels, and - but the pain is being felt in - where is your family from in Spain?
RICARDO: Originally from around Barcelona. We are Catalan.
CONAN: All right. Well, thanks very much for the phone call and good luck.
RICARDO: Thank you very much.
CONAN: A deficit of democracy, we've heard that in many contexts in Europe, Doyle McManus.
MCMANUS: Yes, and it's a theme that I heard when I was in Europe. Again, the frustration with the failure of politics at home to solve these problems, the frustration with the fact of dealing with faceless bureaucrats, but also the frustration that it felt like a rigged game, that it felt like the only people who could really get their phone calls answered at the central bank in Frankfurt or the European Commission in Brussels were the big banks in Paris and Frankfurt and London. So there's almost a flavor in Europe right now of those early months of the Tea Party in the United States. But it's not a Tea Party exclusively off the right because, of course, you've got left-wing governments, right-wing governments. It's a Tea Party all over the map.
CONAN: But in Spain in particular, this is a country that was held back for so long by the Franco dictatorship, and the sense that, finally, released from those shackles, they had figured it out: prosperity, modern development, a modern state that Spain had really come of age. And that whole sense of regaining their balance, that's been lost.
MCMANUS: That's been lost. And in way, this process has been most painful in Spain and Ireland because they had a tremendous boom. They are the equivalence of Nevada or Florida where everybody was doing well, and young people were flocking in to get jobs there. One of the saddest stories I heard was actually from some Irish friends, who said, you know, for years - the Irish suddenly got used to the fact that they were actually importing labor for the first time in their national life, that they had Polish plumbers and Czech carpenters, and that all of their kids could look forward to good jobs in Ireland. And now, in Ireland, they have returned to the sad old tradition of kids getting out of college and beginning to look for work in places like Canada and Australia and having to emigrate for their futures.
CONAN: We should note McManus and Conan are sitting across the table here. Here's an email from Brian in Dallas: In this era of European labor mobility, why aren't young Greeks leaving Greece en mass to go to Northern Europe where the jobs are? Isn't this the pragmatic thing to do? The Portuguese young has started emigrating to Mozambique, Angola and Brazil. What's different about Greece?
MCMANUS: Yeah. There's less labor mobility in Europe than it looks. In the professions, in the better jobs, it's tough to do. You can do that - you could do that in the '50s and the '60s and the '70s when we were talking about factory jobs and low-level jobs. But one of the big problems Europe still has - and this is more true in Southern Europe than in Northern Europe - is there is less labor mobility than there ought to be. You can't take a law degree, for example, from a Greek university and go practice law in Germany or France. It just won't wash.
CONAN: Let's see if we get another caller in. This is Miles. We'll try to get Miles in. Well, we're apparently having trouble with our new technology. We'll see - let's see if we getting in now. Miles, are you there? Miles, there you are. I apologize.
MILES: Sorry about that. Thank you for taking my call.
CONAN: Go ahead.
MILES: I just wanted to say that I was living in Brussels for the past three years. I was actually working at NATO, and I had a lot of colleagues that were doing internships and a lot of Spaniards that were also from Spain and trying to organize themselves in Brussels to try and gather jobs or using internships. It was becoming more and more difficult, and a lot of my friends are also from Canada or the U.K., and having to go back, you know, to, you know, the U.K. or to Canada even to really sustain themselves because they're wanted the opportunities for them.
CONAN: So that mobility that we were just talking about, you saw it there.
MILES: Absolutely, absolutely. And I could honestly say that I'm still talking to friends that are over there at the moment that are still having those difficulties, and it's quite concerning, you know, especially since I'm, you know, a U.S. citizen, and I'm still having, you know, to see these difficulties for myself. And it's just interesting because it echoes a lot into American politics and what, you know, we are seeing over here in terms of being able to create jobs, And it's going to affect us if we want to spread out internationally and, you know, work elsewhere.
CONAN: Well, thanks very much for the call, Miles. Good luck.
MILES: Thank you.
CONAN: And, Doyle McManus, thank you so much for your time today.
MCMANUS: Thank you.
CONAN: Doyle McManus, Washington columnist for the Los Angeles Times, with us here in Studio 3A. Tomorrow, the many challenges confronting childhood sexual abuse decades after it happened. It's the TALK OF THE NATION from NPR News. I'm Neal Conan in Washington. Transcript provided by NPR, Copyright National Public Radio.