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Special report: In Europe's squeezed middle, life gets tougher
November 21, 2011 / 4:11 PM / 6 years ago

Special report: In Europe's squeezed middle, life gets tougher

(Reuters) - Three years after the beginning of the worst economic crisis since World War Two, Europeans are questioning the political decisions that have brought them here.

Amelia Thomas (L) and Gonzalo Acha (R) sit with their daughters Beatriz, Leonor and Isabel at their home in Madrid, November 9, 2010. Gonzalo Acha and Amelia Thomas have eased into the roles the economic crisis has imposed on them: Acha as sole breadwinner with a salary frozen six years running, Thomas as what she calls "creative homemaker". They live with their three young daughters just blocks from Madrid's Puerta de Sol square where the "los indignados" (the indignant) protesting against government spending cuts have regularly gathered. So far, Gonzalo and Amelia have not joined. REUTERS/Andrea Comas/Files

They wonder whether their hopes for themselves, their children and their countries will ever be met. Maybe, they have begun thinking, expectations were too high to begin with.

The picture couldn’t have been more different a decade ago.

Then, Europe’s economies were booming and the euro that now binds 17 members of the European Union together was showing its benefits, especially for weaker countries that enjoyed decreased borrowing costs and reduced exchange rate risk.

It was a time when anything seemed possible.

As the boom has gone bust, governments have cut spending, sometimes drastically, fired public workers and raised taxes.

A year ago, Reuters spoke with five families -- in Greece, Romania, Germany, Britain and Spain -- about how they were coping with the austerity measures. Since then, the measures have kicked in, the economic outlook has darkened and the very stability of the euro zone is under threat.

Here’s how those families are coping now:


By Annika Breidthardt

MUNICH - When orders slowed a few weeks ago at the electrical switch maker where Anna works, she immediately feared for her job.

“I thought, ‘Is this the beginning of the end again?',” said Anna, a draughtswoman who works for a firm that makes high-tech car parts.

Two years ago, the 40-year-old, who asked to be identified by her first name only, was put onto shorter working hours. The scheme, known as “Kurzarbeit”, is Germany’s answer to downturns and is based on the idea that it is better for all workers to take a bit of pain than for companies to start laying people off.

Following the 2008 credit crunch more than 60,000 companies in Germany have used Kurzarbeit; at the height of the 2009 recession, more than 1 million workers were on reduced hours. Economists and politicians credit the system with allowing Europe’s largest economy to emerge from the 2009 crisis more quickly than other parts of the continent.

But even if those who were working Kurzarbeit agree it was a success, they also say it was tough. Many lived in fear that the scheme was just the first step toward the dole lines.

That’s what has Anna worried now.

“It seems like this time the lull was only a blip. Orders are good again but still, whenever stuff like that happens or I hear bad news, I think: the euro was a bad idea,” says Anna over a weekend brunch of white sausages, pretzels and wheat beer.

A bubbly brunette who appeared more relaxed and ready for a laugh than when she was interviewed by Reuters a year ago, Anna said she never cared about politics but that this has changed with the European sovereign debt crisis, which has booted out leaders in Greece and Italy and still threatens the stability of the euro zone.

“Normally, I don’t think as an individual I can change anything. But since the start of the crisis, I have started watching the news. I want to know what’s going on in Greece, what the chancellor decides,” she said.

Anna likes the euro and being able to travel without having to exchange money, but is now skeptical about how it was founded.

“I think they should not have let some countries in,” she said. “Now that I see what a can of worms that has opened, I think it wasn’t thought through properly.”

Despite that, she also speaks of the ‘poor Greeks’.

The fallout from Greece’s debt crisis has singed European banks, panicked investors into dumping euro zone debt and threatens to trigger another credit crunch.

Germany is footing a quarter of Europe’s bill and many Germans are increasingly unwilling to fund what they say are states that have lived beyond their means.

That sentiment could increase now that Germany’s economy, so far largely resistant to the crisis, is beginning to take a hit. Last month, the government cut its GDP growth forecast to 1 percent for next year, from a previous 1.8 percent, and some economists even put a recession on the cards.

For Anna, life has improved over the past year and Kurzarbeit seems to have worked well for her company of about 2,000 staff. The boss agreed to give Anna and her co-worker two temp workers and more equipment, so she no longer feels guilty about taking days off or staying at home when she is sick.

“My personal work situation has improved. I‘m very happy with everything,” Anna said, sitting in the rose-painted dining room of her rented cottage.

Home-made artifacts and a photograph of spices decorate the walls and, just as a year earlier, a traditional gas-fired oven rattles in the background heating the room and the coffee.

Anna has had more time off this year and has traveled around southwestern Germany.

Still, she worries more about the future now than she did two years ago before her hours were cut back. Her Kurzarbeit experience lasted less than 20 days but it left scars.

“I have become more cautious about what I spend my money on. I haven’t got new savings accounts but I do often calculate: ‘what if they canceled the night shifts again and I had fewer shifts to work. Would I get through the month?'.”

In a sign of just how much the crisis has moved her, she told a story of her grandmother, who during the first Iraq War stocked up on canned food and water in fear they would run out.

“We kids laughed at her, but she had lived through two world wars. She was ‘once bitten, twice shy’ and it’s just like that for us now.”


By Avril Ormsby

LONDON - Former clerical worker Christine Goldsmith reads out the names of companies that have turned down her job applications, often without bothering to reply.

The 38-year-old, who has not worked since her second child was born four years ago, is struggling to find a job as Britain’s unemployment reaches its highest level in 17 years.

“I think I‘m going to be at the bottom of the heap,” she said, half-resigned, half-despairing.

Like many other Britons, Goldsmith and her family are in a holding pattern with no real prospects for improvement soon.

Opportunities for employment have decreased since the government said it would slash 300,000 public sector jobs as part of austerity measures to reduce a record peacetime budget deficit.

Goldsmith understands why the cuts are necessary, but says the Conservative-Liberal Democrat coalition government seems out of touch with ordinary people when it comes to how to go about them.

“People didn’t say they want these day centers closed or these people to be made redundant,” she told Reuters, her voice rising as her two children, Aston, 7, and Misty, 4, played on the sofa with a laptop and pink mobile phone.

“They have done it with such speed that I think it is probably going to damage the country ... listen to the people to an extent, don’t just come in and do what the heck you like.”

Below the surface of British society, anger simmers. Protests against higher education fees turned violent, unions have scheduled industrial action against plans for public sector pension reform and rioting that spread through cities across England in August has been attributed in part to the spending cuts.

Goldsmith has little sympathy for the rioters, who went on a looting spree, smashing shop windows and burning buildings. Prime Minister David Cameron has blamed gangs for the disturbances, the worst in decades. Others say it was not gangs, but independent opportunists.

“It was a chance for them to get something for free,” she said. “I want women’s magazines. I want a nice Mulberry handbag. I don’t want to shop in the 99 pence stores. There’s so many things I want but can’t get. There was no excuse for the riots.”

Goldsmith’s partner of 11 years, John Ougan, 39, who takes emergency telephone calls for the Metropolitan police force, said they are “comfortable” living on up to 35,000 pounds a year, about 9,000 pounds above the average annual individual salary. But Goldsmith wants to work because it would be “safer”.

“Just because you don’t know what’s going to happen,” she said. “John could be made redundant.”

A VAT sales tax rise of 2.5 percentage points to 20 percent earlier this year and inflation running at 5 percent have made them keen to keep a tight hold on the purse strings.

Trips to the cinema, using cheap tickets obtained through film clubs and special offers, will not be followed by a visit to McDonald’s but homemade sandwiches, and they have given up some branded products.

One luxury they did indulge in was a flat-screen television. Weekly Mandarin lessons for their children, which cost nearly one thousand pounds a year, are regarded as an investment. Misty began her lessons this year.

“It’s a head start, a little kid like him being able to speak a language,” said Goldsmith, who never knew her Nigerian birth parents and was adopted at an early age.

Ougan works long hours and frequent night shifts, which he doesn’t like, but he is too worried about the threat of recession to quit. When he left his job at a local council in London, he had a new post within two days of sending his CV off to an employment agency.

“I couldn’t risk that now,” he said.

He does not anticipate jobs cuts in his division, but the government’s austerity drive includes a two-year public sector pay freeze and pension changes, including increased employee contributions.

Public sector unions have called for a day of action in late November. Ougan is not intending to take part.

“Times are now that you’ve just got to think about yourself,” he said. “It’s a hard society now, you can’t be thinking about what your next door neighbor is doing, you just worry about yourself, your own family, your own children.”


By Tracy Rucinski

MADRID - Gonzalo Acha and Amelia Thomas have eased into the roles the economic crisis has imposed on them: Acha as sole breadwinner with a salary frozen six years running, Thomas as what she calls “creative homemaker”.

They live with their three young daughters just blocks from Madrid’s Puerta de Sol square, where “los indignados” (the indignant) protesting against government spending cuts have regularly gathered. So far, Gonzalo and Amelia have not joined.

Anna, a draughtswoman, poses for a photograph inside her kitchen at her home in Munich October 29, 2011. Two years ago, the 40-year-old, who asked to be identified by her first name only, was put onto shorter working hours. The scheme, known as "Kurzarbeit", is Germany's answer to downturns and is based on the idea that it is better for all workers to take a bit of pain than for companies to start laying people off. Following the 2008 credit crunch more than 60,000 companies in Germany have used Kurzarbeit; at the height of the 2009 recession, more than 1 million workers were on reduced hours. Economists and politicians credit the system with allowing Europe's largest economy to emerge from the 2009 crisis more quickly than other parts of the continent. REUTERS/Michaela Rehle

“I share their message, but I also know a lot of people who brag about not paying taxes and then are the first ones down in Sol protesting,” Thomas said.

She applauds a certain unquenchable Spanish spirit in the protests, however. After rallies and sit-ins, protesters often congregate in bars and cafes; one of the conundrums of Spain’s tough economic times is that its bars are almost always full.

“Spain is a festive country. We should try to take advantage of that economically. Germany has its industry, we have sun and good drinks,” she said.

Acha, a 53-year-old industrial engineer, and Thomas, 38, who trained as a furniture designer, are fairly typical in Spain where the unemployment rate recently topped 21 percent and recession looms again.

The conservative People’s Party, which scored the biggest election victory in 30 years on Sunday, is widely expected to deepen the austerity measures that have hit the middle class.

Thomas was a supporter of the outgoing Socialists thanks to the progressive agenda of Prime Minister Jose Luis Rodriguez Zapatero, who legalized gay marriage and has been an open advocate for women’s equality.

The Acha’s stretched income means they still have to make hard choices when it comes to their daughters’ education and extra-curricular activities.

When the idea of horse-back riding lessons for the two eldest daughters arose, Acha gave it a definitive thumb’s down.

“My salary is still frozen but prices keep going up, so our buying power slips each year,” Acha said. He dips into savings every month to cover basic expenses.

Beatriz, 10, Leonor, 9, and five-year old Isabel have a good chance of living abroad as adults and so foreign languages lessons are important, but need to be put on hold for the moment too.

Acha is planning to sell an apartment he owns outside of Madrid when the girls are older in order to finance their education abroad.

A plan to create three nooks in the master bedroom for the girls, who currently share a room, was spoiled when a pizza parlor opened below their apartment, making ventilation difficult.

Now the middle daughter will get the entrance hall where the couple had planned to move their own bed.

“Leonor says she doesn’t mind, so we’ll probably move her bed there and have Beatriz and Isabel share the other room,” Thomas said as she swept up some paper cuttings from her youngest daughter’s art project.

Since taking over all of the household chores, Thomas said she considers the monthly 400 euros the couple used to pay a cleaning woman her own.

“I spend that money on basic whims, like buying books, going to the cinema or buying clothes we might need,” said Thomas, who used to have her own studio but went freelance when her daughters were born.

“Plus, my phone is starting to ring about some projects, so maybe things will finally pick up.”


By Ingrid Melander

PANORMO, Crete - For a while, Georgia Katharaki and George Vassiliadis had a taste of the good life their parents enjoyed, but these days they eat only bitterness.

Slideshow (5 Images)

He is a surgeon and she has 11 years of experience as an English teacher, but since Greece’s catastrophic debt crisis they and their two children have had to move in with Georgia’s parents to survive.

The couple’s salary is shrinking and George fears he may lose his job.

“We feel very bitter, we feel angry,” Georgia said as Kalliopi, 3, runs around her grand-parents’ traditional carved wooden furniture at their house in the seaside Cretan village where they moved in January.

“We don’t see light from anywhere, it’s just total black,” she said looking out of the window at dark clouds over the Aegean.

A year ago, Georgia was making 1,300 euros a months -- already down from previous years -- and George was hoping to earn about 2,500 euros a month on a one-year contract that brought them to Crete after six months of unemployment in Athens.

They smile sadly thinking of those numbers now. Their family income is down 20 percent, even before the special “crisis” income tax introduced this year as well as the significantly expanded property tax, totaling several thousand euros.

As Athens focuses on plugging the national deficit by cutting spending and raising taxes, they are increasingly worried about the future. George will be unemployed for at least 3 months before he finds out if his contract will be renewed.

“We don’t know what is coming. They are announcing measures all the time,” Georgia said. “Our politicians are not ... capable of handling the crisis, they are not capable of dealing with the Europeans and negotiating to help their country.”

Greece has had to rely on the European Union and International Monetary Fund to stave off bankruptcy, and after days of political turmoil is now being governed by an interim coalition government.

The action in Athens is political chicanery, the young mother of two says, echoing the black-clad anarchists and protesters who march almost daily in Athens. “If we could set fire to parliament and destroy it, it would be better.”

George, a soft-spoken 35-year-old, took part in a strike for the first time in his life this year as his disillusionment over his own situation and the poor conditions at hospitals peaked.

He works in a hospital in Chania, Crete’s second-largest city, but the family decided to settle with Georgia’s parents, 80 km (50 miles) away, to save money and because they did not know how long they would stay in Crete.

George divides his nights between the hospital, his family and a small flat in Chania, spending about 600 euros a month on rent and gas for the car.

Like Georgia, he is angry at Greece’s politicians. But he is also furious at his compatriots, and points to the country’s long-standing practice of evading taxes and living off perks and EU subsidies.

“Everyone was happy, politicians were giving money to get votes, Greeks were living the American dream ... but it was a bubble. Everyone knew that one day we would have to pay,” he said. “The problem is that once again the poorest have to pay for this disaster.”

Like thousands of other young qualified Greeks, George has started to think his family should pack up for good and leave -- possibly for Australia.

“If we go it will be for twenty years,” he says as he holds 7-month-old Dimitris, babbling happily in his arms. “It’s a big decision.”

Georgia’s mother, who is preparing lunch for the baby, shakes her head at the idea the family might have to emigrate but says they should do whatever they think is best. A 65-year-old retired teacher, Margarita Katharaki blames her own generation.

“I feel disappointed and sad ... our generation lived at the expense of their children and their grandchildren,” she said.


By Luiza Ilie

BUCHAREST - In Mariana Stefanescu’s kitchen a gentle autumn sun glints off a corner table and matching soft-padded bench. A radio is humming softly and there is a fresh pot of coffee on the stove. This is Stefanescu’s favorite spot, a place where her entire family gets together.

The table set is a new addition. Over the past year, Stefanescu and her husband, Dan, have also bought a coat stand for their hallway, and air conditioning: “basics, not luxuries” needed to make their 65 sq-meter (700 sq-feet) apartment a home.

The purchases were not easy to afford. The family lives on roughly 2,500 lei ($780) a month, just under two average wages. There is Stefanescu, a neurosurgery nurse at a state hospital in Bucharest, the capital, Dan, who works for a charity foundation, and their two children, Andreea and Vlad.

The family is still reeling from last year’s value-added tax hike and a 25-percent cut in state wages, including Stefanescu‘s. The government has since rolled back some of the cuts but wages may not reach pre-crisis levels until late next year at the earliest.

While austerity has stabilized public finances and helped the country inch away from a two-year recession, like most Romanians, the Stefanescus haven’t recovered yet.

The VAT hike pushed inflation up to as much as 8.4 percent earlier this year and the leu currency is close to an all-time low, down a quarter from 2008 highs, hurting not only euro-indebted households, but most Romanians. Many services, including telecommunications and rents, are priced in euros.

“You go shopping for the same things as last year, just the basics, nothing fancy, but you pay more for them,” says Stefanescu, 43, as she peels potatoes for the day’s lunch -- vegetable cream soup and chicken with peas.

“Thank God we don’t have debt.”

Stefanescu and her husband were considering taking out a loan when the crisis hit, stifling lending and bursting a housing bubble that has dotted city landscapes with half-finished buildings. Roughly half of Romania’s labor force of just under 5 million is in debt, most of it denominated in euros. One in seven is behind on payments.

Even without debt, the Stefanescus live payday to payday, carefully weighing every expense. Their only savings are the 42-leu monthly government school subsidies for 10-year-old Andreea and 9-year-old Vlad.

“That is not the ace up our sleeve.”

Inside her home, the tight-knit family feels secure. But outside their doors, Stefanescu is concerned about deteriorating public services in areas like healthcare and education, and other signs of a social fabric wearing thin.

For years before the crisis, Romania has been plagued by low productivity, particularly in its sprawling public sector, where the heavy hand of the centralized state lingered long after the demise of Romania’s pre-1989 communist institutions.

The financial crisis exposed inefficiency and goaded the government into reforming its bloated public sector. By the end of last year, Romania had cut some 130,000 jobs, bringing the state sector down to 1.25 million people, still a quarter of its workforce. But the road to reform has been bumpy and it will take years before they settle in.

Across the country, job cuts and restructuring mean that public workers like teachers and hospital staff must work more for less pay. The healthcare and primary and secondary education sectors have each lost some 30,000 employees, and earlier this year, high school examinations showed one in two students failed to graduate, the worst results for 20 years.

Stefanescu has seen the damage first hand at work, where she or her colleagues often cover hospital shifts alone due to the staff cuts. On a recent 11-hour shift she scrubbed in for two tumors, a drainage and two hernias.

“We need more people,” says Stefanescu, who spent more than a decade working with children with Down’s Syndrome before becoming a nurse. “It’s not normal that I should be alone in the operating ward from morning to evening so often.”

Figures show successive governments have allotted more funds for public investment than most EU states, but without major results, which rankles Romanians. The recession has also hurt an emerging private sector.

Instead of responding to austerity with the street protests and strikes seen elsewhere in the European Union, though, Romanians have muddled through.

“When you know that we get all the hardship, we’d expect to see something for it,” Stefanescu says. “On the other hand, we have what we deserve. There is this mentality that we have of cooking our own goose. If we want change, we’re the ones that should change.” ($1 = 3.213 Romanian Lei)

Editing by Sonya Hepinstall and Simon Robinson

Our Standards:The Thomson Reuters Trust Principles.
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