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July 2012 Volume 19 Number 3
EU: Greece, Spain
EU leaders continue to urge member states to open themselves to more migrants. Peter Sutherland, the UN special representative to the Global Forum on Migration and Development, told the British House of Lords in July 2012 that migration was a "crucial dynamic for economic growth" and that national government leaders should open their borders "however difficult it may be to explain this to the citizens of those states."<< back
EU Home Affairs Commissioner Cecilia Malmstrom made similar arguments in June 2012, asserting that demographics will lead to a "serious lack of skills and talent" unless EU member states open their borders. She called for government leaders to "stand up against the rising tide of anti-immigrant rhetoric." She said that assertions such as migrants are "taking our jobs, forcing down our wages and exploiting our welfare systems? are alarmist, misleading and wrong. It is the worst kind of politics, exploiting people's insecurities and worries about the future."
EU governments in June 2012 agreed that member states may reintroduce border controls for renewable six-month periods "when the control of an external border is no longer assured due to external circumstances." Many observers decried the change to allow national governments to re-introduce controls, saying that it backtracked on pledges to promote freedom of movement within the EU. However, France insisted on giving national governments authority to re-impose border controls because North Africans traveled through Italy to France during the Arab Spring in 2011.
The 26-nation Schengen treaty allows national border controls in case of a terror threat or security threats linked to sports or other events. The British government in July 2012 said that, if Greece leaves the Euro zone and "too many" Greeks seek jobs in the UK, it may impose restrictions on Greek entries.
EU leaders dealt with economic troubles in Greece, Spain and other southern European countries during spring and summer 2012. Greece held elections in May and June 2012 that kept mainstream parties committed to cutting the government's deficit and retaining the Euro, but asked EU lenders to relax some of the conditions they imposed on their loans. Spanish banks received support from EU nations via the European Stability Mechanism.
The major issue for Greece and Spain is that cutting government spending, which is a condition of getting loans to support the economy, also raises the unemployment rate. Unemployment in the 17 countries that belong to the euro zone rose to 11.1 percent in May 2012, up from 10 percent a year earlier; over 16 million workers were jobless. There was a sharp contrast between Germany and southern European nations. Unemployment was less than six percent in Germany, and over 20 percent in Greece and Spain.
Greece. Greece is caught in a cycle of austerity and deflation, as budget cuts reduce employment and asset values. The Greek economy is expected to shrink by six percent in 2012, unemployment topped 22 percent in spring 2012, and government debt as a percentage of GDP rose to 165 percent. The success of Syriza, a coalition of left-leaning parties that promised to keep Greece in the Euro zone and stop layoffs and debt repayments, raised fears that any new Greek government could reject the E11 billion in additional cuts demanded by Germany and other Euro members as a condition of receiving bailout aid.
In February 2012, an interim Greek government signed an agreement for E170 billion in loans and debt write offs in exchange for budget cuts.
Spain. The low interest rates that accompanied the introduction of the Euro in 2002 spurred a real estate boom in Spain that reached its peak in 2007, attracting migrants from Eastern Europe, Africa and Latin America to fill construction and services jobs. In 2012, unemployment topped 24 percent in the first quarter, and unemployment among those under 25 was over 50 percent.
Spain, which has one of the most entrenched insider-outsider labor markets in Europe, revised its labor laws in 2012 to reduce the prevalence of the short-term labor contracts that many youth are forced to accept to get jobs. But public employees and those employed by large firms continue to have secure jobs, while those without jobs have difficulty finding formal jobs. Some workers laid off from formal jobs are now working informally for cash wages of E50 to E60 a day, avoiding payroll and income taxes.
In 2007, Spain had the world's highest rate of home ownership, as 80 percent of residents owned their homes. Spanish home prices have fallen by 25 percent since their peak, compared with a 50 percent drop in the prices of Irish homes, suggesting that Spanish home prices could fall further. Some $875 billion in home-mortgage debt was threatened by jobless Spaniards unable to make payments, which may destabilize Spanish banks.
Portugal is also struggling. About 15 percent of all workers are unemployed, and 30 percent of youth are jobless. The economy is contracting, so there is little hope of job creation in the next year. Portugal may have a harder time achieving a sustainable recovery because of low education levels; in 2009, only 30 percent of Portuguese adults had completed secondary school.
Rising unemployment and the defeat of governing parties in many European countries has prompted calls for a "growth pact" or more government spending to stimulate economic and job growth rather than austerity to reduce public debt. However, any stimulus spending would have to be borrowed from Germany and other stronger economies, raising questions about whether southern European nations should receive more loans before they restructure.