The periphery and the losers

I just finished reading George Soros’ excellent essay on the euro crisis, published both in the New York Review of Books and in Spiegel. It’s very well done, and regardless of whether or not one agrees with his conclusions, it serves as possibly the best overview I’ve yet read of how this whole mess came to be and where it stands now. Soros lays it out in layperson terms, which most economists and economic journalists can’t quite master. This is worth noting because a major reason why many people have no real idea of what’s going on is that even when they try to learn, they’re beaten back by the impenetrable writing or logic of the majority of sources. The ones that aren’t impenetrable tend to be nationalistic and oversimplified, which leads to the kind of polarization we’re seeing right now: the “Merkel is a Nazi” opinions in Greece, and the “southern Europe is lazy” opinions in Germany.

While I feel that Soros’ essay is well worth reading in its entirety, one passage in particular caught my eye:

There is a close parallel between the euro crisis and the international banking crisis of 1982. Then the IMF and the international banking authorities saved the international banking system by lending just enough money to the heavily indebted countries to enable them to avoid default but at the cost of pushing them into a lasting depression. Latin America suffered a lost decade.

Today Germany is playing the same role as the IMF did then. The details differ, but the effect is the same. The creditors are in effect shifting the whole burden of adjustment onto the debtor countries and avoiding their own responsibility for the imbalances. Interestingly, the terms “center,” or “core,” and “periphery” have crept into usage almost unnoticed, although it is obviously inappropriate to describe Italy and Spain as periphery countries.

Obviously! — because Italy, Spain and Portugal were members of the European Community back before it became the European Union (which in turn was several years before the introduction of the euro). They are part of the core, but the two-tiered system that has now been created has pushed them into a different category. The European Union is no longer a collective of nations with common goals. Instead, we now have the “center/core” and the “periphery,” which is also called the “creditors” and the “debtors,” which really means — and nobody seems willing to say this out loud — “winners” and “losers.”

Despite the lack of public acknowledgment, I can assure you that the losers are extremely and painfully aware of their status. A whole bunch of nations being forcibly pushed into losing, with little to no power to fight back, is not conducive to the dream of the European Union. Neither is the creation of a winning class of nations who believe the losers only want to drain money from them while continuing to be “lazy” and “profligate.”

Soros makes the eventual outcome of this quite clear:

The permanent division of the European Union into creditor and debtor countries with the creditors dictating terms is politically unacceptable for many Europeans. If and when the euro eventually breaks up it will destroy the common market and the European Union. Europe will be worse off than it was when the effort to unite it began, because the breakup will leave a legacy of mutual mistrust and hostility.

The mutual mistrust and hostility are already there. The Portuguese are a polite people; their newspapers are not yet making Nazi references, as Greek and Italian papers have. That doesn’t mean the suspicion hasn’t been roused, as German writer Ingo Schulze discovered:

In March I held a reading in Portugal, in the city of Porto, from one of my books in translation. The atmosphere of friendly interest was from one moment to the next chilled by a single question from the audience. All of a sudden, we were merely Germans and Portuguese, who sat facing each other as enemies. The question was unpleasant. Were we – meaning myself, a German – now taking over with the euro what we had failed to take over with our tanks? Nobody in the audience disagreed with the sentiment. And suddenly I responded as desired – namely, as a German: “No one is forced to buy a Mercedes,” I said, offended, “and they should be happy to be getting credit that would be cheaper than credit on the financial markets.” I thought back to all the German newspaper stories heaping abuse on the PIGS countries, and it made my molars grind.

“PIGS” refers to Portugal, Italy, Greece and Spain — and that acronym alone says everything you need to know about how the winners perceive the losers. In the history of peacetime international politics and diplomacy, has there ever been a more insulting term accepted for general usage?

After Portugal’s prime minister announced last week that individual Social Security taxes will increase in 2013 from 11% to 18%, I did the math. This latest tax increase (I have lost count of how many there have been), coupled with the previous reduction in all civil servants’ gross salaries, means that my wife’s take-home pay will soon be 30% less than it was four years ago — and 10% less than it was before she became a full professor. She will make less now as a professor than she did as a doctoral student with a scholarship, at a time when everything else — gasoline, utilities, food, tolls — has dramatically increased in price. In the entire length of her career, she will never make up these years of lost income, even if the crisis magically ended next year. Nor is there any end in sight. Every year we tighten our belts more, and every year some new austerity measures are announced that make our previous belt-tightening look like days of luxury. Meanwhile, businesses fail all around us, the unemployment rate skyrockets, and we count ourselves fortunate to have jobs at all.

This is what it feels like to be a loser. I do not personally know any lower or middle class Portuguese who don’t feel this way, and the comments sections of newspapers certainly reflect that. The Spanish are in the same boat, as well as the Italians and Greeks and Irish. There is an enormous and continually swelling population that no longer think of themselves as Europeans, but as downtrodden nations, all victims of relentless and unsympathetic controlling powers who disdainfully refer to them as PIGS.

The European Union was created in reaction to the horrors of the two great world wars, but some of the hottest and most volatile ingredients for war are being created at an ever-increasing pace, right now. I sometimes wonder if the winners see this quite as clearly as the losers.

Addendum: After I wrote today’s post this morning, the German high court ruled the European Stability Mechanism to be constitutional. This is obviously a good thing, and has already made the financial markets happy, but whether it’s more than just another stopgap measure depends on what steps are taken next. I’m not holding my breath.

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About Fletcher DeLancey

Socialist heathen and Mac-using author of the Chronicles of Alsea, who enjoys pondering science, politics, well-honed satire (though sarcastic humor can work, too) and all things geeky.
This entry was posted in Europe, politics, Portugal. Bookmark the permalink.

15 Responses to The periphery and the losers

  1. Inge says:

    First of all.. It’s ingrained in every human to think us and them. When someone sees someone encroaching on their territory it will most definitely be ‘them’ and never us. So now that the ‘strong’ countries population sees that it is also going down the drain for them, of course they put the blame on ‘them’. It’s a basic human reaction.

    But i have to say.. did you ever truly believe we would be Europeans? Yes, when everything is going well and even then..not so much really. So when things go wrong, no way in hell. Several studies show that we most closely identify with the community/city we live in (not even the country) and at almost the opposite end the continental identity. In such a way, Europe will never stand a chance. Will it disappear? Once yes: every single country/kingdom/.. that ever existed has also stopped existing at some point. Nothing has ever lasted..
    Will it fail now? Naahhh i don’t think so. But will it hurt in the meantime? yes. But please do remember Europe was born out of the ashes of the world wars, this economic and social crises will damn well hurt, but i don’t think it will cause it to crash.

    As to PIGS… you’re English. What do you suppose it means in French? In German? In Dutch? It’s not true that the English meaning is automatically assumed when someone says it (especially when pronounced in their own language). Sometimes a pipe is a pipe.

    • oregon expat says:

      Actually I’m American, not English. 😉 But I do take your point. I’m also aware that the language of business in Europe is English, so while the non-English speaking citizens won’t know what a pig is, the business people, economists, diplomats and lawmakers certainly do.

      Of course you’re right about the regional identities — the same is true of the US. There’s a reason this blog is called Oregon Expat, not American Expat — my state identity is much stronger than my national one. The difference is that as much as some states would be happy to be rid of others, we’re all stuck with each other so we’re forced to work it out. It’s messy and not even close to ideal, but it does work (more or less). But Europe’s cohesion is still so tentative — there really isn’t a sense of “we’re all in this together.” The crisis happened too soon, before the EU got through its initial growing pains. Then again, I’m not sure how long it would have taken to get through those growing pains. The regional differences and historical memories are deep and wide.

      • Inge says:

        I apologise.. i meant english speaking not your nationality.. I was thinking faster than i can type obviously.

        Contrary to you, i do not believe in European cohesion. While i do believe we will work it out somehow, i do not think that we will ever be an united Europe. We are too alike and at the same time not alike enough. But we will work it out because in the end economics will drive us to it. (sounds cynical, doesn’t it) This Europe is actually based on economic reasons and that will be what keeps it together.

        I do have to emphasize however that while English is spoken by many to some extent. Most often it will be either French or German that is used in France or Germany for instance. I’ve been there and cursed on it. I’m guessing it is the same for Italian and Spanish businessmen. It makes economic sense to talk in the language of these countries. So yes while some might talk it fluently, it is not a regular use and thus not the first association with speech. So i still don’t think PIGS has the connotation you suspect for most. We, Europeans, have as of yet not united around a language, not even on the higher business levels.

        • oregon expat says:

          Contrary to you, i do not believe in European cohesion.

          I think you may have misread my reply. When I said we were “forced to work it out,” I was referring to US states, not European nations. In fact we are in agreement on the current lack of European cohesion…unless I misread your reply?

        • Joan Arling says:

          While it is theoretically true that English is the common language in the EU, listen to Guenther Oettinger, European Commissioner of Energy:

          I would rather not bet that he knows what “pig” means.

  2. M. says:

    I am sorry to say, but my first thought while reading your entry was: Welcome to the club. The club of losers. In which my country is a member for, I would say, a couple of hundred years. As for now we are not even in a ‘losers’ category, we are under it, among countries outside eurozone.
    So don’t be so angry that you are PIGS, at least you are somebody, while we are nobody. Your problems are talked about, ours are non-existent, although exactly the same (including earning less than a few years ago).
    Suprisingly after today I am an optimist, even if I know that before it gets better, it will get much worse. I am optimist, because I know that EU is at this point that has to make big changes to survive, or fall apart. Federal Europe, as in today’s Barroso’s speech, may be a very good answer to many European problems and mostly to the rest of world’s largest economies. And now everything is in hands of Germany. They can make it work or totally screw it. And be responsible of the fall of Europe again. I wonder if Angela Merkel sleeps soundly 😀

    • Inge says:

      Intriguing.. may i ask which country you are from?

    • oregon expat says:

      Well said, and I needed a reminder that there are onlookers “not in the club.” Though I’d have to counter you on one point: it’s not true that Portugal’s problems are talked about. We’re too small and our debts are relatively inconsequential to the EU. The day Portugal finally gave up and asked for a bailout, I predicted — in a general email to my friends and family — that as of that moment, Portugal would vanish from the international news. The jackals had got their prey and would be off in search of a new victim (which turned out to be Italy, not Spain as I expected…though Spain’s turn came not too much later), and with Portugal down and out, there would be no more interest in it.

      I was right. Every article I have since read about the euro crisis refers to Greece, Italy and Spain, and almost never to Portugal. It’s as if, to the rest of the world, nothing ever happened with us. We could only wish that were true.

      But…I thought Poland was doing well economically? Clearly I am not informed; can you enlighten me?

      • M. says:

        You are right, the number of news about Portugal’s problems is definitely smaller than about Grece, Spain, or Italy (although in today’s news about ESM, Portugal was mentioned next to Grece as countries that German citizens don’t want to help the most ). The same goes to Ireland. Because of that one may get a feeling that Portugal and Ireland are doing better than the rest of PIGS (or PIIGS?). What I find funny (if you can call anything about the subject funny) is that Germans seem to not be aware that ‘their’ money pumped in, for example, Grece, also support their own banks Grece had a debt to…

        And now a whinning time 🙂
        Um, well, Poland is doing fine (yet), what can’t be said about Poles.
        This is true that while European economy was shrinking we were this green island. But at the same time, using a world crisis as an excuse, many financial cuts were made. Since 2009 a great part of public sector salaries are frozen, not only there are no raises, also there are no yearly compensations for inflation. VAT increased from 22% to 23% (for some things like kid’s clothes from 8% to 23%). Some prices of basic things skyrocketed, some foods even 100%. Retirement age was changed from 60 years old for women and 65 years old for men to 67 for everybody, at the same time an income to our personal retirement accounts was cut in half (the system is complicated). Many parts of social support or allevations just disappeared, but still our national debt went dangerously close to a level of 60% of GDP. Oh joy.

        • oregon expat says:

          but still our national debt went dangerously close to a level of 60% of GDP

          No surprise there. When a government whacks salaries and hugely increases taxes/costs, people naturally do not spend. When people do not spend, the economy contracts, and when the economy contracts, the national debt increases as a percentage of GDP, even if the actual debt has not increased by a cent. The only time that an economy can weather such radical changes without incurring economic destruction is when growth is happening and the global economy (or at least the economies of the nation’s trading partners) looks cheery. Doing it during a crisis, even if the crisis is not (yet) affecting that particular economy, is idiotic. (But shhh, don’t tell the Troika that. They still haven’t figured out basic economics.)

          I am sorry to learn that your government has put you in this same useless boat. Was it done in an effort to look good for EU membership?

          • M. says:

            Yes, it was done in an effort to look good for EU membership. Well, I hope so. Because the alternative is that it was done for a personal gain. What a coincidence, “Der Spiegel” just informed that Merkel thinks our Prime Minister (responsible for all above) is an excellent candidate for a President of the European Commision. 🙂
            Oh well, no worries, it will take us only a little longer to catch up with the rest. Like 65 years instead of 20.

  3. Ana_ñ says:

    I share your view, M., and I would love to share also your optimism.

    As one of those being called PIGS I’m very aware of what is behind this “innocent” acronym.
    Although we are talking here mainly about Germany, as far as I know, the word came from the UK, belonging to the European Union but somehow perceived as obstructionist regarding the euro, and was used too by US newspapers — don’t forget where the financial mess started in the first place.
    These extracts from old comments by Conde de Aranda in The Economist (https://www.economist.com/user/2929709/comments) are a good example of the mistrust you mention:

    “Do people using the acronym PIGS and the editorial board of the Economist ever think that they are incurring in neo-Nazi, racist comments that if applied to any other collectivity will made them subject to the most severe criticism and probably something worst?”

    ”“I propose to anyone in PIGLAND to use the term TOXIC APES when referring to the Anglo-Protestant Economies whose toxic financial centers are at the epicenter of this crisis”

    “from the point of view of the average PIG it is not us but those TOXIC APES the ones who are at the origin of the mess we are all in. Did Maddoff, Lehman Brothers, Norther Rock and the like happen in Madrid, Athens or Rome?

    “Was it not the appalling level of greed, corruption, dismal risk assessment records and downright incompetence by regulators and operators alike in the City and Wall Street the main reason for the financial crisis? But of course, as a way of distracting everyone’s attention it is easier to blame it on the Greek civil servant. After all he is another dark Mediterranean dago…”

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