Europe: a slow-motion tragedy

The debt crisis in Europe's peripheral nations is far more than a mere fiscal crisis, says Merryn Somerset Webb. It's a human tragedy too.

In all the excitement about the new Greek bail-out, something important is being missed. A slow motion human tragedy is unfolding across the peripheral nations of Europe.

I spent half-term on the Algarve in an almost-empty hotel. In the fields surrounding it, the oranges are rotting on the trees. I'm told they aren't being picked commercially because the market price isn't high enough to cover the labour and bureaucratic costs of selling them.

So they're only being picked by those desperate enough to try to sell them on the roadside. But while oranges are all but free on the Algarve, not much else is. Golf enthusiasts told me that the price of playing a round has doubled in the last few years, while the prices in cafs and restaurants seem to be near central London levels.

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Raising prices in the face of falling demand is clearly unconventional. But there is, we were told, a crazy rationale behind it. Service providers say they can't cut prices and stay solvent (labour costs, taxes and bureaucracy again).

But lack of demand also means they can't survive without more revenue. So they're trying another tactic: putting prices up in the hope that they won't lose too much custom along the way. Sadly, it isn't working. My children now associate Portugal with tinned spaghetti sauce rather than eating out.

This is all anecdotal and obviously fruit and holidays are hardly Portugal's only exports (it produces half the world's cork and is a major exporter of clothing, footwear and wine).

But what it does tell you, should you be in any doubt, is that Portugal's only way forward is serious devaluation. The same is true of Greece. There's much talk of how this devaluation can be internal (or fiscal). But look at the pain this is causing.

Youth unemployment is 35% in Portugal and 46% in Greece. Not enough newspapers are writing about this, but a piece by Ian Bell in Scotland's Herald offers some sad statistics statistics that all EU top management should have hung on the walls of their smart offices.

In 2008 Greece had the lowest suicide rate in Europe. It has doubled since. Drug use is rising fast. All child and psychiatric helplines have seen "unprecedented numbers of calls". There are 20,000 homeless people on the streets of Athens (the comparable number in London is 4,000). Break-in reports have doubled. Soup kitchens have sprung up across the Greek capital (the Archbishop of Athens runs 73), as they have in Lisbon, where, according to The Daily Telegraph, an estimated 200,000 people rely on them.

Europe's leaders (the Germans and the French) spend much of their time swearing that any break-up even into dual currency zones is unthinkable. They should stop thinking of the eurozone as a grand project and start seeing it as the unemployed of Greece and Portugal do: an utter disaster. Then they should get on with doing something about it.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.