Macron win eases euro crisis but he says reform is needed
EU economy chair believes changes will come after German election in the fall
LISBON, Portugal—Vitor Rodrigues remembers when they told him in the 1990s that the euro would bring affluence. The owner and only fulltime employee of the Leituria bookstore on a leafy street in Lisbon’s Estefania district says he believed it.
“Now I feel very disenchanted,” the 47-year-old says at his cash register. “The euro has served macro interests, not the man in the street. It’s been good for banks and for political careers but it hasn’t brought us any great benefits.”
The euro, the target of populist politicians who claim it has inflicted undue economic pain on Europeans, has a new lease on life after Emmanuel Macron, a firmly pro-euro moderate, won the French presidential election this week. His rival, the right-wing Marine Le Pen, had wanted to pull France out of the bloc, with likely painful consequences for the currency. But even Macron acknowledges the need to strengthen and reform the euro. He will find it, however, an uphill battle.
There are political logjams making the currency more resistant to market crises and to end its most painful shortcoming — a reliance on crushing budget austerity to fix countries whose finances and economies run into trouble.
Countries that ran into heavy debt — Greece, Ireland, Portugal, Cyprus and Spain — got bailout loans from the other members in return for massive cuts to public spending. That caused job losses, pushed families into poverty and hurt company earnings.
It pitted creditor countries like Germany and the Netherlands against the often resentful debtors. And even countries like France or Italy, large economies that are struggling to grow but did not need bailouts, have had to focus on public spending cuts to meet euro rules.
The eurozone is growing and many of these economies are now doing better. The EU’s regular Eurobarometer poll shows 56 per cent agree the euro is good for their country, with 33 per cent saying it’s bad. Even in Greece and Portugal, majorities support the euro. But the brutal bailout experience has fuelled the kind of disenchantment Rodrigues conveys.
Portugal hoped to graduate from being a low-wage economy with euro membership in 1999. But the low interest rates that came with its linkage to stronger economies such as Germany invited overspending. Portugal dug itself deep into debt and needed a 78-billion bailout in 2011.
Portugal’s finances are healing, but only after years of cutbacks, including wage freezes and pension cuts.
Worst hit has been Greece, which saw its economy shrink by a quarter. Shuttered storefronts litter downtown Athens. Whole families can be seen lining up for free meals at a growing number of soup kitchens. What went wrong? When trouble arrived, member countries found that joining the euro had taken away important safety valves. They could not let their currency fall in value to make themselves more competitive in international trade. And there was no large central treasury to even out recessions.
Roberto Gualtieri, who chairs the committee on economic and monetary affairs in the European Parliament, thinks the need for new steps is widely enough recognized that action could follow the German election in September.
“I hope that after this electoral cycle, we will have the political conditions for providing more investments, more reforms, and better and more completed economic and monetary union,” Gaultieri told The Associated Press. “The great victory of Macron is an encouraging signal in this direction.”