Euro dodges new crisis with Macron win but needs fixes
LISBON, Portugal — Vitor Rodrigues remembers when they told him in the 1990s that the euro would bring affluence. The owner and only full-time employee of the Leituria bookstore on a leafy street in Lisbon’s Estefania district said he believed it.
“Now I feel very disenchanted,” the 47-year-old said 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 rightwing 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 such as Germany and the Netherlands against the often resentful debtors. And even countries such as 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 percent agree the euro is good for their country, with 33 percent saying it’s bad. Even in Greece and Portugal, majorities support the euro. But the brutal bailout experience has left the kind of disenchantment Rodrigues conveys.
He said he and people he knows have undergone years of steady erosion of their buying power. “Someone in an average job, say middle management, earns less now than they did before the euro,” he said.
Portugal hoped to graduate from being a low-wage economy with membership of the euro 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-euro bailout in 2011.
Portugal’s finances are healing, but only after years of cutbacks, including wage freezes and pension cuts. The average monthly salary in the private sector, also before tax, is around 1,100 euros.
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.