Dutch With Food Aid Shows New Economic Reality Engulfing Europe
It’s just after lunchtime on a drizzly day in the Amsterdam suburb of Bos en Lommer and the line of people waiting to fill their bags with free rice, juice, potatoes and bread is lengthening.
The market is one of 135 food banks in the Netherlands bailing out people trying to survive on less than 180 euros ($234) a month, the threshold to qualify for the aid. Organizers say demand for the service rose 20 percent in the first quarter.
“I’m alone, so I will manage, but what’s happening to families, with kids and everything?” Willem Lammers, 52, who lost his job as a packager six months ago and has 4,000 euros of debt, said as he made his ninth visit to the bank on April 20. “I don’t know how they do it.”
While Athens emerged as the center of Europe’s debt crisis, cities across the continent are trying to cope with the biggest decline in prosperity since World War II. A report last week showed that euro-area unemployment rose to the highest in more than 15 years in April and the region’s economy is contracting for the second time in three years.
Voters in France elected Francois Hollande as president May 6 after he pledged to soften austerity measures backed by his predecessor Nicolas Sarkozy, while Greece was thrown into another stage of turmoil after elections split parliament between pro- and anti-bailout parties with no clear winner.
“Before people didn’t see any questions and now they don’t see any answers,” said Austin Hughes, an economist at KBC Bank Ireland in Dublin. “There had been an expectation that incomes, employment prospects and asset prices would improve forever. That certainty is now gone.”
Lyon to Valencia
Europeans everywhere are changing jobs, homes and habits to accommodate lower pay, shifting markets and slowing economies.
The malaise is affecting residents in the capital of AAA rated Netherlands, whose government quit last month amid opposition to budget cuts, as well as those in Lyon, France’s hub for small companies, Dublin, where the immensity of the euro region’s banking losses first surfaced in 2008, and Valencia, with the most unpaid bills of Spain’s semi-autonomous states.
“We have to condition ourselves to get used to something that for now we are calling a crisis and that soon will become normal,” said Ramon Congost Valles, 62, managing director of Aidico, Valencia’s construction technology institute.
One of the two music schools where Francisco Perez, a 36-year-old oboe teacher in Almussafes in the suburbs of Valencia, works cut his monthly pay by about 150 euros after the government reduced subsidies by about 50 percent. He said he now earns 850 euros a month.
“It seems one should consider oneself fortunate to even have a job,” Perez said.
Valencia, whose debt is rated junk by Standard & Poor’s and Moody’s Investors Service, has applied for central government aid because of 4.2 billion euros of unpaid bills to about 10,000 suppliers. The city, once at the heart of Spain’s real-estate boom, is cutting social benefits, investments and public jobs while raising taxes and the price of education and health care.
Palmira Castellano, 50, lives in the Valencia suburb of El Perrello with her 23-year-old disabled daughter. She said she is looking for work after her brother-in-law lost his job in the construction industry and can no longer provide financial assistance. Her parents also don’t have enough left from their monthly pension of 1,200 euros to help out and she can’t cope on the 500 euro stipend that her daughter gets from the government.
“The situation is really very ugly,” Castellano said. “My sister is too ill to work. Her husband is unemployed and they have a mortgage to pay, and my parents can’t support all of us on one pension.”
The 50 biggest publicly traded companies in the euro region lost about 1 trillion euros of stock market value in the past five years, based on the performance of the Euro Stoxx 50 Price Index. European home prices have dropped as much as 33 percent from their peak levels in 2007, according to the European Housing Review 2012 published in February by the London-based Royal Institution of Chartered Surveyors.
A gauge for Western European sovereign debt risk also has risen. The price of the Markit iTraxx SovX Western Europe index for five-year credit-default swaps was 285 basis points yesterday, up from less than 50 in October 2009 when Greece began to disclose the true level of its debt.
“People felt they were cruising along the economic highway headed straight towards greater prosperity,” said Hughes at KBC, the Brussels-based bank that was bailed out by the Belgian and Flemish governments starting in October 2008. “Now all the traffic seems to be coming against them and all they can hope for is to dodge the wreckage.”
In Ireland, emigration rose to the highest since the 19th century in the 12 months ended April 2011, with about 76,400 people leaving the country during the period, according to the latest data from the Central Statistics Office.
Spain, which attracted more immigrants in 2006 than any country in the euro region, is now seeing an outflow. A net 50,090 people left last year, the nation’s statistics office reported.
Greek and Spanish youths, faced with 50 percent unemployment, are moving north and west. Silvia Alvarez Ferri, 31, couldn’t find a job in Spain, and now works as an architect in Hamburg, the second-largest city in Germany, whose economy holds the euro together.
“After a year looking for a job in Spain, with no interviews or possibilities, I decided to look in Germany,” Alvarez Ferri said over coffee by Hamburg’s Alster lake in the center of the port city. “The majority of my architecture friends who stayed in Spain are unemployed, and I would most likely be too if hadn’t moved.”
The German economy grew at an annual rate of 2 percent in the final quarter of 2011, albeit less than half the pace of the first three months of the year. With the jobless rate staying at a two-decade low of 6.8 percent in April, employers from Berlin to Munich are looking abroad for workers, including engineers, doctors and nurses that they can’t find locally.
The number of people living in Germany from European Union countries with non-German citizenship rose 6.4 percent to 2.6 million in 2011 from a year earlier, according to Germany’s Destatis statistics agency. The number of Spanish citizens living in Germany climbed 4.5 percent, it said.
“There is a lack of skilled and highly qualified workers in Germany today,” said Beate Raabe, a spokeswoman for Germany’s employment agency. “We are very active in Spain, Portugal and Greece these days. It may create a win-win situation, where someone unemployed in southern Europe gets a job in Germany.”
Elsewhere, entrepreneurs are taking advantage of the crisis. Clues to how Ireland and Europe may recover lies closeted in a warehouse in central Dublin. The building, located between Google Inc. (GOOG) and Facebook Inc. (FB)’s European headquarters, was earmarked for redevelopment before Ireland’s decade-long real estate bubble burst, precipitating the nation’s economic decline.
The warehouse is now the home of Startupbootcamp Dublin, which seeks to help new businesses get off the ground. The group provides mentoring, 12,000 euros for young technology companies and six months of office space. On May 16, about 100 investors will hear pitches from 10 start-ups involved in the project.
“The crash is creating opportunities,” said Eoghan Jennings, a former chief financial officer of Xing AG, the German networking company, who is now running Bootcamp Dublin.
In Lyon, France’s third-largest city, one such start-up in the city of 475,000 people has benefited as the economy deteriorated. Chronostock, founded in 2007, sells inventory bought from struggling retailers.
The company, which takes space left vacant when others go bankrupt, expects to double sales this year to 20 million euros, co-founder Bruno Poncet said in an interview. Chronostock opened 35 stores in 2011 and has plans for another 60 in 2012.
“We noticed stores were doing really well only in the first phase following their opening and in the few weeks before they went out of business,” said Poncet. “Our clients don’t come in because they want a certain brand, they don’t care if they get a blue or red kettle. People come into our stores because we bring discounts to their neighborhood.”
Lyon is thriving relative to other parts of France and Europe, with a new tram and metro extension, as well as the region’s biggest shopping mall, the Confluence, which opened on April 4. The unemployment rate for the Rhone-Alpes region that includes Lyon was 8.4 percent in the fourth quarter, compared with France’s national average of 9.8 percent, according to data from Insee, the institute for statistics.
“Large companies and local governments are working with small labs and sharing ideas on how to face the crisis,” said Christine di Domenico, an economics professor at the EMLyon business school. “Small companies aren’t just left to figure things out on their own.”
Scratch beneath the surface and the effects of the debt crisis and France’s efforts to deal with it show through. The end of Sarkozy’s presidency followed the ouster of leaders in Ireland, Portugal, Greece, Italy, Spain, Slovenia and Slovakia during the past 15 months.
The change in the political landscape is occurring as governments take unpopular steps to lower budget deficits by at least 450 billion euros, according to figures compiled from finance ministries across the 27-member European Union.
The crisis is now at the door of nations previously considered invulnerable such as the Netherlands. Dutch Prime Minister Mark Rutte submitted his resignation last month, after the anti-immigration Freedom Party withdrew support for spending cuts and tax increases totaling about 14 billion euros.
“We knew the crisis was coming,” said Sweder van Wijnbergen, professor of economics at the University of Amsterdam. “We know we’re not like Spain or Italy, but we’re not like Germany either. It will take a while before we get out of this and that will depend on Germany.”
Back in Amsterdam’s western suburb, the food bank is getting more popular. In the first quarter, households using food banks in the city jumped to 1,350. About 3,000 may use the safety net by the end of the year, said Piet van Diepen, a food bank board member.
“The lines will get bigger and bigger as more people lose their jobs and have trouble paying their rent or mortgage,” Van Diepen said.
In the Netherlands, more than 23,000 people get aid from the food bank, he said. The numbers also are increasing in places such as Britain, where figures showed this month that the economy has slipped back into recession amid the biggest budget cuts of any of the 10 largest EU countries.
Melanie van Egeren, 30, said she expects to tap the food bank for another three months, as she seeks to survive on 800 euros a month with an eight-year-old son.
“It’s tough,” the Amsterdam resident said last month. “But one learns to get by with less.”
To contact the editor responsible for this story: Tim Quinson at email@example.com