Not Everyone Is Allowed To Travel In First Class. ´Verstehen Sie?´
Here it is. Angela Merkel will be hardly able to spend her next summer holidays in Greece or Portugal. That´s not all, though. Sooner or later, we may add Spain and Italy to the list. Furthermore, France does not look like the best option either. Well, it´s no go. She will have to jolt in Norway, Finland or Denmark.
Second class passengers
Having wandered through Spain back in 1999, I noticed an interesting phenomenon. A significant part of products being offered in local stores carried information for consumers only in three languages. Have a guess which they were. Spanish, Portuguese and Greek. It was clear, the products were going to be marketed only within territories of these three countries. It was also clear, that any attempts of producers to provide labeling information in German, French or English would be pointless. And finally, it was also clear, which three of EU family members were the poorest. … Second class passengers.
Albeit poor, but they have a lot to offer. What exactly? Indeed renowned tourist destinations and resorts. Their contribution to the economy is irreplaceable. Travel and tourism revenues in these countries represent from 15 up to 25 percent of overall exports, according to World Travel and Tourism Council (WTTC). A GDP share including indirect and stimulated effects ranges between 12 and 15 percent. Quite a good piece of cake, isn´t it?
That´s probably what foreign investors had also concluded as during 1999 and 2011 these countries experienced quite a massive foreign direct investments influx. Spain 452,74 billion USD, Portugal 62,94 billion USD and Greece 24,65 billion USD. Not a minor fact remains that a huge volume of it did flow in during three years amid the peaking subprime mortgage crisis between 2006 and 2008. Spain 39%, Portugal 30% and Greece even 51%. (source: World Bank)
Quid pro Quo
Benefits must apply mutually, however. Had this not been the case, temperamental ´Southmen and Southwomen´ would have hit the streets much earlier. This ´quid pro quo´ resulted in a fact, that the population of these nations had not been doing so badly, after all. Somewhere gradually, as in Spain, somewhere more rapidly, as in Portugal and Greece, the middle class had grown stronger and had been given massive social programs that for example workers in some other countries could only have dreamt of.
For ilustration, a minimum wage in Greece had ultimately climbed to 751,39 EUR having declined consequently to current 586,08 EUR. Spain´s minimum wage currently represents 641 EUR and in Portugal it is 485 EUR. Surely, these figures are still miles away from Germany, which even though on a federal level does not have an institut of minimum wage, there exist about 480 regional minimum wage rates starting from approximately 1277 EUR. (sources: European Employee Federation, Eurostat, Spiegel)
Following OECD statistics from 1998 to 2008, an average annual wage growth in a private sector settled at 2,7% in Spain, at 3,1% in Portugal and at 5% in Greece. Wages in a public sector were growing even faster. In Spain at 4,4%, in Portugal at 4,8% and in Greece at 7,7%. For 1998 – 2008, the private sector growth versus public sector growth, respectively, is as follows. Spain 29,9% vs. 53,1%, Portugal 35,3% vs. 58%, Greece 62% vs. 108,7%!
A bitter awakening
Today, the very same middle class, a basic pillar of the society, is being deprived of these conquests due to imposed austerity policies. Salaries are being revised, social benefits are being eliminated or cancelled and with rapidly growing unemployment, instability rises as well. Households, businesses, governments go bankrupt or keep kicking the can down the road in a predeceased agony. They´ve fallen into a debt trap with no way out. Many of them invested in real estate assets, which now instead of generating revenues, are yawning emptiness. Debt repayments have become impossible under such circumstances. Banks are ´thick-sown´with these bad loans leading governments to bail them out by purchasing these ´toxic´ assets and by pouring liquidity into the banks.
Consequences are obvious and should leave no doubts. If the governement of Zimbabwe prints out additional money and supplies its economy with this fresh liquidity, it will mean higher inflation. (possibly hyperninflation in this case) The same economic rules should also apply anywhere including the EU or the USA, shouldn´t they?
What does this further mean for ordinary people, their day to day lives and their future?
Declining of purchasing power, the middle class shrinkage, further instability and deepening of social inequality between the rich and the poor.
Too much, too fast
Nevertheless, the initial idea was right. Inhabitants from the ´periphery´ had just wanted to make it to the standard of living of the EU´s most developed countries.
The number one problem was, that they´d wanted this to happen in an ´accelerated motion´. Who on Earth could have guessed that it all was a bubble.
The number two problem resided in a fact that the ´periphery´ nations were and still are not destined for making it to the living standard of for example Germany or Netherlands (remember the three language labeling at the beginning of this article?), as this simply would have meant a cut-down in the standard of living of the most advanced countries.
In other words. Forget on traveling in first class in the ´EU express train´. Someone has to be traveling in second class, as well, … or get off the train.
A train? A wrack!