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Europe’s Wishbone Needs a Backbone

Before you condemn Europeans protesting the severe austerity measures the International Monetary Fund and the European Central Bank wants to impose on Greece and Spain, step into their shoes for a moment, please.

I bring a unique perspective to the dialogue and want to share with you my understanding of events on the continent. You may or may not know this, but I live in Barcelona. And you may or may not have heard about the significant protests going on in Barcelona, Madrid, and some other major cities throughout Spain. These events form part of the bigger story of Europe's economic malaise and unfolding social problems.

In what's becoming a series of mostly-peaceful mass demonstrations, people are gathering to voice their frustrations with an economic, political, and banking crisis that seems to have no end in sight. They are called indignados — infuriated or enraged — for a reason. El Movimiento 15-M , as it has been dubbed, is the people's way of standing up and saying enough is enough (#M15 or 15-M on Twitter). It's not just the hippies, anarchists, the unemployed, or the labor unions, either. Senior citizens, families, students, people who wear suits and ties during the week, and everyday Joes are participating with the hope of affecting much-needed change.

So when I read EBN Editor-in-chief Bolaji Ojo's take on the crisis in Greece and Spain and the impact it may have, I cringed at this part:

    It seems there is a major disconnect between what many wish for and the sacrifices they are prepared to make for longer-term gains. The Greeks and the Spaniards want to continue living in a past where the government coddles them and where minimal tax is collected, even as demands for social services keep skyrocketing. (See: Wishbone vs. Backbone.)

I don't think that's a wholly accurate depiction of what's going in Greece or Spain. Yes, some services and fat should be trimmed, and people are slow in letting go of things they've become accustomed to. And, I am not 100 percent clear on what the indignados truly want or what measures they think should be put in place. Calling for a collapse of capitalism or jobs for all doesn't quite go far enough, although the conversation is deepening. TV, radio, newspapers, and intellectuals are doing their jobs and beginning to run well-thought-out commentaries of what could be possible.

Here are just a handful of reasons people are taking to the streets, at least in my backyard:

  • The unemployment rate in Spain is 20.7 percent, way higher than the euro zone's 9.9 percent rate and Germany's 6.1 percent, according to Eurostat, the EU's stat-keeping office. Among youth under 25 years old, that number skyrockets to 44.4 percent, far from the euro zone's 19.6 percent average.
  • The average salary in Spain, depending on the information source, is less than 22,000 euros (about $32,000). But a commonly quoted take-home salary now comes in at under 16,000 euros ($23,000). While this data may be a bit old, the average European brings in 27,000 euros ($39,000), while people in Holland and Germany take home more than 40,000 euros (almost $58,000), according to several news reports.
  • Inflation was running at about 3.4 percent in May, again higher than the 2.7 percent for the euro area, according to the latest Eurostat data. Tack on this year's increases for utilities and food prices, and paychecks don't go very far. Forget about buying a flat in my middle-class neighborhood; prices have not come down as much as people expected, and few could get a mortgage for the average starting price at 300,000 euros ($434,000).
  • Corruption is endemic at financial and government institutions. I can't even begin to summarize the corruption people perceive happening within their banking and government institutions, even as politicians redline proposed budgets and cut services. I would need three blog posts for that.

With this backdrop, let's re-ask the question of why places like Spain, Greece, Tunisia, or Egypt matter to the high-tech sector and what impact continued civil unrest could have in near-term or further down the road:

  • Europe's inability to solve its crisis situation with Greece, Spain, and, on the fringe, Portugal and Ireland will put the brakes on any sustainable recovery being led by Germany and France. Until the thorn is plucked, policy makers will not be able to focus on long-term growth.
  • Instability in Western Europe will affect US trade with the continent. It already has. Bloomberg News reported this week that the International Monetary Fund cut its 2011 US growth forecast for the second time in two months, “warning that further setbacks to a recovery pose growing threats to the world economy, along with potential contagion from the European debt crisis.”
  • If the US economy softens, consumer spending will weaken further.

In the conversations I've had with locals, I've advocated the idea that a real investment in cross-sector innovation will make a difference. Obviously, government stimulus packages and opening mom-and-pop shops won't be enough. I think it's time for industry to start tapping the creative, skilled, well-trained, and relatively low-cost (compared to other European countries) labor pool that's hungry for new opportunities. The pharmaceutical and renewable energy segments seem to have particularly strong potential, based on what I'm reading, and locals have an incredible eye for design, which could be applied in product development.

Maybe if the high-tech industry stopped letting governments around the world drive all the austerity measures and decided to use some of the cash on their income statements, perhaps we'd see greater growth momentum globally. Maybe, just maybe, the people on the streets taking a stand have the backbone the industry wishes it had.

14 comments on “Europe’s Wishbone Needs a Backbone

  1. FLYINGSCOT
    June 23, 2011

    It is always good to hear different views on a particular topic and I really appreciated reading your post.  I am in the UK and believe me we are watching developments in Greece (and Spain to some extent) with great interest and concern.  Having seen what happened to Ireland we are all worried Greece will start a domino effect.  I agree we cannot expect governments to take care of all our matters and that industry must do its bit.  I am not too familiar with the innovative companies that exist in Greece so it would be good to hear more about these if possible from other posts.

  2. Anand
    June 23, 2011

    Bloomberg News reported this week that the International Monetary Fund cut its 2011 US growth forecast for the second time in two months

    Jennifer,

     Do you think there will be another recession. People are predicting double-dip recession, what is your take on that ?

  3. Parser
    June 23, 2011

    There are always two sides to the story. It is a vision perspective, which does not change reality but puts different spin on it. It is a very good article.  

    I think that it was our (USA) financial system crash, which started the European crisis. As you list 4 main problems none of them has any short-term fixes. A bailout by French or German governments will not fix them either. What is Europe thinking about doing long term like through the year or more?  

  4. mario8a
    June 24, 2011

    HI Jennifer.

    Somebody said long time ago… “the people has the government they deserve”  and I don't in Barcelona the people is very happy right now, however when the corruption is visible to the public eye, then is very hard to maintain faith in the people you choose to protect your civil rights

     

    Regards

  5. Jennifer Baljko
    June 24, 2011

    Hi,

    I'll try to work through some of the questions here, but like many of you I'm wondering the same thing.

    Flyingscot is in the UK & also watching things unfold. He says, “I am not too familiar with the innovative companies that exist in Greece so it would be good to hear more about these if possible from other posts.”

    Unfortunatley, I don't have a lot of info on Greek companies, and would love to hear if others have any names to drop. In Spain, I'll refer you to this site, http://www.technologyreview.com/microsites/spain. It has info about advancements being made in areas like transportation, biotech, IT, solar & wind power, aerospace, desaltation, and research & development.

    anandvy asks if I think there will be another recession. Frankly, I'd like to get out of this one first.  Honestly, I have no idea. There are many wiser people and experts who are better at predicting these trends than I am.

    Parser – You're right –  US problems rippled far and wide, and we (the world) have exhausted our short-term fixes. I would say top of most European minds is what results will come from more emergency funding and loans at interest rates that countries like Greece can't afford to pay back. For me, while I see the importance of this kind of financial backing, throwing good money after bad isn't going to solve this incredibly complex political, economic and social issue. Some other solution is going to have to be created; I sincerely wish I could predict that solution and its outcome, but I can't. Here's a story in today's Financial Times that gives an update of where things stand. Looks like Greece has agreed to more austerity measures.:http://www.ft.com/intl/cms/s/0/29203b60-9da0-11e0-9a70-00144feabdc0.html#axzz1QB5wKBSo

    mario8a – yeah, I hear you on the people having the government they deserve. A troubling problem that surfaced here in the local elections in May is that many people are so disgusted by the current political structure and the inability to bring about electorial changes that they refuse to go to the polls to vote. Next year, Spain will have national elections and this no-vote attitude could influence the results.

    Thanks again everyone.

     

     



     


  6. mfbertozzi
    June 24, 2011

    I agree with Mario8a's vision and going through Jennifer's editorial (very good and interesting Jennifer !), I would like to report an additional perspective. Since a long ago, European Govs applied only one strategy (cutting costs for public funds) without conceive in parallel another one to promote and support tech investments. Major corporations have moved the production and supply chain activities in Eastern/Far Eastern Regions for saving reason and for cheapest labour costs, but fixed costs associated to burocrazy in Spain, Greece, Italy and so on are still high. As consequence, without tech investments strategy, poor public funds available for helping people and corporations, jobs' cut and burocrazy machine no changed, it seems there won't be a future, at least in short-medium term.

  7. Jay_Bond
    June 24, 2011

    This is a very interesting article with a different view point based on the fact that you are living in the middle of these said problems. It appears there is no easy short term fix. It would seem like the protesters should get together and come up with a realistic plan. This plan needs to look ahead five years. They need to realize this is not going to get solved immediately. If they take their plan and divide it up into small parts and try to accomplish these one at a time they will eventually get there. If they have an anti-vote feeling going on right now, they have no hope of change happening since part of the plan needs to be getting new blood into office and out with the corruption.

  8. Himanshugupta
    June 24, 2011

    Each European country is characteristically different from one another. This unrest in Greece/Spain is kind of fight for identity. Northern Europe society's way of working and living is quite differnt from the Southern Europe. Now if Germany or other country start to push a nation then i can understant the retaliation. IMO short term harsh measures should be replaced by strategic long term plans for the betterment of all.

  9. mfbertozzi
    June 24, 2011

    IMO short term harsh measures should be replaced by strategic long term plans for the betterment of all

    That's the point Himanshugupta, you have outlined major and urgent gap to fill.
    Jennifer and you are depicting how is difficult actually EU works to conceive a global strategy for recovery; each country is still working alone and quite indipendently.

  10. Nemos
    June 26, 2011

    Very nice article, and from my part of view close to the reality to what is going on to Portugal and Greece. As you described perfectly the problems are deeper, and if we say that some people they are protesting only for the new hard austerity measures that are coming, we do an epidermic comment, and we don't see the real problems. Problems such as corruption have been killing the social backbone, and they don't let anything to grow properly

  11. Anna Young
    June 27, 2011

    Mfbertozzi,

    “IMO shortterm harsh measures should be replaced by a strategic long term plans for the betterment of all”

    I understand what you mean. Whichever way you look at it, a plan or measure is required to bring stability to Greece and Spain's economy and to Europe as a whole.

    I think there should be a global long term measure. What if some of the high tech industry as suggested in Jennifer's article considers investing the cash in their possession cautiously to stimulate growth globally. Might this help?

  12. mfbertozzi
    June 27, 2011

    Well Anna, I think so. It should be the a possible path forward to encourage, in order to start  globally benefits' distribution of that action. Unfortunately, it seems there is only a few corporation in condition to perform investments because cash has been fired during past months.

  13. stochastic excursion
    June 27, 2011

    The numbers show that consumption patterns need to be cut back, but I think that people are right to protest when moderate and low income people are the only ones asked to sacrifice.  The bailout in Ireland cost the average taxpayer $63,000, so it's not a matter of people being coddled.  Demands for reform are called for, and demonstrations like the ones we're seeing are sometimes the only way to be heard.

  14. mfbertozzi
    June 27, 2011

    I really trust you, stochastic-excursion. I am still thinking positive for the reason you have mentioned: people which collaborate all together are in condition to move forward, sooner or later, the country where they are living.

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