By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
Unemployment is a staggering problem in Eurozone countries that are at the core of the debt crisis. Spain’s jobless rate jumped to 22.8%. Among 16 to 24-year-olds, it’s an unimaginable 51.4%, up from 18% in 2008 when Spain’s crisis began with the collapse of its housing bubble. In Greece, youth unemployment reached 46.6%. In Portugal, it’s 30.7%, in Italy 30.1%.
And optimism, that essential source of energy for the younger generation, has been replaced by pessimism. Gallup reported that 80% of the people in the EU had a negative outlook on their local job situation. Crisis countries were at the extreme end of pessimism: in Portugal, 84% thought it was a “bad time” to find a job; in Italy, 91%; in Spain, 92%; in Ireland, 93%; and in Greece, 96%.
These numbers convey a sense of utter hopelessness. For young people, the vision of a good life that their society has imparted on them has gone up in smoke. A bitter irony: it’s the best educated generation ever—and the most pessimistic.
People deal with it the best they can. Some retrench. Even 35-year-olds move back in with their parents. They delay plans and wait for the situation to turn around. But others, the most energetic and entrepreneurial, those that the country needs to rebuild the economy, they don’t have that kind of patience. They pack up and leave to find a job elsewhere. And they are doing it in massive numbers.
Spaniards are heading mostly to Argentina whose economy has been booming over the last few years, though troubles are everywhere. The exodus reversed the flow from Argentina to Spain following Argentina’s bankruptcy in 2001. For many years a magnet for immigrants, Spain registered a net emigration of 50,000 people in 2011.
Portuguese prefer their former colonies. Angola, whose official language is Portuguese, has a wealth of natural resources, particularly oil and diamonds. Since 2002, after a quarter century of civil war, the economy has grown in the double digits every year, and Luanda has become the most expensive city in the world. According to the Organization for Economic Cooperation and Development (OECD), 70,000 Portuguese sought their fortunes in Angola in 2010 alone. Similar numbers are expected for 2011. For Portugal, with a population of only 10.5 million, it’s significant.
Other Portuguese try their luck in Brazil whose economy is in need of engineers and experts of all kinds. Brazil recently softened its immigration restrictions to attract the educated elite—and others are have taken notice. For example, the number of Spaniards immigrating to Brazil jumped by 45% in 2011.
Ireland has had a net outflow of people since 2009. First, Polish immigrants who could no longer find work returned home, but then the Irish themselves set out mostly for Australia and New Zealand, which have favorable visa agreements with the EU. 40,000 left in 2011, many of them women.
Greeks head to Germany, an irony of sorts, given the bad will that German efforts to impose strict austerity measures have engendered in Greece.
When educated and entrepreneurial young people leave their country in massive numbers, it impacts the economy for the long term. Their country invested heavily in their education, an asset, and now they put this asset to work in another country. There, they earn money, pay taxes, consume goods and services, and rent or buy a home—the exact activities that their own country must have to get out of the economic quagmire. Sure, emigration reduces the expenses for unemployment compensation and other services, but it drains the economy of energy, entrepreneurial spirit, can-do attitude, and knowhow.
And it worsens the debt crisis. For national debt to remain “sustainable,” young people need to stick around, start a productive career, consume, build up assets, move into those vacant homes that banks are holding, and pay taxes. But the exodus underway now doesn’t bode well for a long-term solution of the debt crisis—assuming that a country like Greece can even stay in the Eurozone.
“The case of Greece is hopeless,” Otmar Issing said. He should know. He was on the Bundesbank and the ECB. Another substantive voice in an increasingly loud chorus. But it’s legally impossible to kick Greece out of the Eurozone. So he suggested a procedure—a procedure that has been happening all along. Read…. Kicking Greece out of the Eurozone.
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“Greeks head to Germany, an irony of sorts, given the bad will that German efforts to impose strict austerity measures have engendered in Greece.”
Seemingly ironic, but highly logical.
In the US, where there is class discrimination, the emigres would be the less educated.
“Greeks head to Germany,”
This is also what I would have expected. I’m a little surprised so many of the Spanish, Irish, Portuguese, and Italians are leaving the eurozone (which involves visas and whatnot) rather than moving across Europe (which has legally guaranteed freedom of movement). I guess that freedom of movement isn’t as real as it was supposed to be.
It’s going to cause interesting results when all the unemployed young Greeks, Italians, Spanish and Portuguese become French and German citizens.
The freedom to move is completely “real”. The problem is that getting a job normally requires competency in the language of the employer — which is much easier for a Spaniard moving to Argentina than to Germany.
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There is a lot of portuguese in France too.
I Think between 0,5 and 1 Million with people of portuguese background.
They came in France since the 60s, many carpenters masons, plumbers are portuguese.
I my opinion they are so far the best immigrants in France.
Maybe so. Luxembourg may also make such a claim.
“If it weren’t for a fungus, the Irish would not be among us.”
The fungus being banks, of course.
Years ago the English drove people out of Ireland by Starvation, now it is the Germans by means of money. Bad news for Ireland good news for wherever they go.
Especially if you own a bar.
Thanks for that obvious unnecessary racist cheap shot.
Lighten up. No worse than blonde jokes.
> Unemployment is a staggeringly high in Eurozone
Maybe if we.. give bankers another $Trillion… they’ll spend it into the economy.
I think it is surprising that no major immigration into the US is mentioned. The relative ease to choose where to work in the EU was formerly sold as an advantage.
The US has a pretty cruddy economy right now as well, particularly for younger folks, and since 11 September 2001 our immigration policy has gone from being rather welcoming to being positively punishing. Even people who are already here, have earned advanced degrees, have brought over their parents, and have made for themselves friends and a successful life are heading back to India, China, and Europe because of how big a hassle getting citizenship has become. It’s sad to see; we’ve educated a whole generation of Chinese engineers, they’ve grown to love the US, grown to prefer living and working here, and then we’ve driven them out. Absolutely moronic.
The same Bible that condemns usury between fellow countrymen also commands love toward aliens.
I dont’ recall, but did you say once before that usury on foreigners was OK?
Yes, according to Deuteronomy 23:19-20 usury from foreigners is OK – the intent being, I suppose, to make them servants of the lenders.
But today, things are much worse. We are charged usury for counterfeit money – so-called “credit”. We have been enslaved to counterfeiters – the banks.
What kind of money did they have at the time of Deuteronomy?
Good question. Possibly gold and silver dust. Certainly not our current system where the ability of the banks to create money is unlimited.
Letters of credit are ancient; we see them on the clay tablets of the Sumerians. They predate metal currency.
Gold, silver, electrum, and copper coins would have been a form of money as well by the later period of Deuteronomy.
If gold was good then, it should be good now.
that sounds kind of freaky. They’re only about feet tall and have heads like light bulbs. Not sure how that would work.
should be: 4 feet tall.
I noticed today waiting for the bus that my thoughts are solidifying and the imagery is coming back. The solar storms must be settling down.
so 4 out 100 Greeks think now is not a bad time to look for a job. Well? I guess anytime is good to look if you need one. I’d prefer not to have one, if possible. I hate work of any kind.
Is SKF a steal in here? I keep hearing noise to that effect but then the market shoots up. What’s Chris Whalen shorting by the way, Susan the other?
craazyman. I tried SKF monday, when the market gave it a chance to roll over hard. Didn’t happen.
Equity Markets are saying everything is fine for now, and by now I mean until beyond the march date for Greece going under. Bad things may happen, but the market is saying everyone is prepared with headges (private) and backstops (central banks).
I’m dying for a pullback in gold and silver here, but despite being overbought, no dice yet. Markets will have to pull back a bit, or at least pause at this price level for a while. It definitely isn’t acting like a good short opportunity at all.
“are heading back to India, China, and Europe because of how big a hassle getting citizenship has become.”
Include me as Canadian in this bunch about to leave. We’ve been appealing a stupid technicality, which responsibility lies with PA Labor Department. This is delaying our green card application. We’ve been waiting FOUR YEARS for ICE to process a file that takes 5 minutes to resolve. The “official” waiting period was slated to be 30 months maximum.
I will spare the readers the list of nasty consequences this shit is having on my family, but suffice to say that we are beyond fed up.
FT,
Your posts are among those I most respect and look for as I scan through too much information.
Sorry to hear about your situation. Illogic abounds in our world these days. Keep us appraised of your situation and please continue to share your thoughts and commentary. You are respected by myself and probably many others.
it’s awful, mainly because the entire process is cloaked in secrecy and is completely arbitrary
Brazil huh, hmm, exactly what kind of skills do they want?
Meanwhile the Chinese treat “debt” as nothing to write home about and enjoy annual average GDP growth rates of 10%. Won’t be too long before the Western 99% start wondering what the Chinese understand about debt (money) that their Neo-Liberal rulers don’t!
We are experiencing the real negative effects of kleptocracy everywhere. It is all so much tinder on the floor. When it all goes up in flames, the same elites that engineered the meltdowns and euro crisis and then didn’t see them coming won’t see this coming either.
A good question to ask is if there can be too much enterprising educated young worker in an economy, especially if the purpose of the education system and the dreams of the students themselves is to achieve an economic status accessible only to a small minority domestically (I.e. much smaller that the students cohort).
Fot that matter, Germany exported not only quality goods but also lots of immigrants – I believe high quality – to the US, Russia, etc… during the 19th and 20th century. Still, it is a quite successful country, so one could venture that it didn’t suffer that much from the “Exodus”.
I don’t understand why I keep seeing references to “it’s legally impossible to kick Greece out of the EU”.
That wasn’t the case 10 or so years ago when I was actively studying EU policy. It was a lengthy process, designed to be difficult and time-consuming in order to give aggrieved parties time to cool off, but it wasn’t impossible. I seem to remember Romano Prodi or someone as making the distinction between the EU’s constitutionally protected exit process, and the US’ lack of one, which of course led to the Civil War.
I guess they’ve tweaked things since then?
Well, I sure hope all those on the move have done at least some perfunctory research as to where they are headed for ‘greener pastures’. For instance, anyone headed from Spain to Argentina can look forward to (on average) half the purchasing power they now enjoy.
I find this little chart depicting nations’ GDP per capita as expressed in Purchasing Power Parity most useful for pointing out the huge disconnect between where most people seem to think various countries fall on a simple “wealth” basis and reality – it is most useful for cutting through various wildly wrong stereotypes. Brazil is 74th and China 90th on this scale, for instance. And in terms of Europe, only Norway (that is, the Oil Kingdom of Norway) and the non-country that is Luxembourg surpass the US.
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita
I would suggest the bulk of these people on the move are returning home. That doesn’t mean large population movements won’t happen in future. They not only will come, but they will DWARF what is happening now – but that’s down the road a piece and in conditions far, far more desperate than what’s happening today.
But ENOUGH of this transparent effort by the US-based global finance/corporate cartel to play the divide and conquer card with the peoples of Europe no less than the Distracto Circus served up by partisan farce in the US.
Know Thine Enemy for crying out loud.
Twice the purchasing power, you mean. Pay attention to the way this actually works. If you move to a country which is on the whole poorer than yours, *you end up with more purchasing power* because you walk into the elite.
No. I know exactly what I meant and what IT means. The ASSUMPTION in this piece is that an engineer, or teacher, or whatever in Spain can up and move to Argentina and expect to land an equivalent job and lifestyle. That assumption is totally off-base. It depends entirely on if Argentina needs engineers or teachers, or whatever and how badly. China has engineers and teachers coming out of its ears, for instance.
Now, if you’re stinking rich and don’t have to or want to work, and also don’t want to live amongst the people, you can of course find some nice place to spend your days. That was NOT who this piece was talking about. This piece was about the “young” or “entrepreneurs” or whatever. No evidence is provided to support the notion that that is the “who” we are talking about. I simply offer what I think is a more likely explanation – Argentina (and lots of other places) fared very poorly until very recently in relative terms. It is far more likely the movement was from poor-to-rich country in the past, and that is now showing a modest reversal. Now that the “rich” country is in serious trouble and jobs are evaporating, returning home is a common option exercised.
And OF COURSE I know that GDP per capita does not deal with how wealth is actually distributed – but it DOES indicate what a FAIR distribution would look like. I just thought it useful for people to try, at least on occasion, to NOT see Germany as a powerhouse when the US is 5x the size (and 25% richer per capita). Or that Brazil or China are “wealthy” when they are NOT – not even sort of.
But I’m just some poor communicator who never seems able to get his ideas across. I’ll take up a writing course as soon as I’m able.
Also, GDP per capita is useless as it doesn’t reflect wealth distribution.
I find the analysis of this trend to be pessimistic.
I see it as a good thing that educated Europeans are flocking to Latin America and Africa. Latin America and Africa are very very poor compared to Europe and these educated Europeans will be a boon to their economies, and overall will boost total human welfare.
(We) young, highly educated Southern Europeans have been leaving the sun for Germany, the Netherlands, the UK, Scandinavia, etc… for at least a decade now. It is not a problem caused by the response to the crisis, it has been there since the ’80s (hysteresis!), and a reality since the dot-com crash and the Euro-disaster. At least in Italy, that is.
Out of my highschool class of 26 people, only 2 have children (a grand total of 3 kids). Of those 3, 2 (my own) are in the Netherlands. That’s a total offspring of *1 girl* for 25 people. We are now 30 year old, I do not know how many more will have kids. Consider that many are still living at home.
But again, this is not caused by the crisis or the response to it, it was always like this: my generation was promised the world and expects it. They are just going to “indignantly” sit there complaining until someone gives them a house, a job, Gucci clothes, a German car, and holidays twice a year. They were doing that during the “better” times, and they are still doing it today.
Somehow I cannot get myself to sympathize with those who stayed behind, nor to care about whatever future Italy will have as a country.
This is the second straight day you have rejected one of my comments for no discernable reason. One more time and you will have heard the last of me.
Hope this is resolved and you stay, Jake. You make plenty of good comments.
Yes, I found your comment the other day about the psychology of professional money managers (I think it was yours) insightful.
I hope it’s just a technical fluke, I hate to think comments are being rejected (ex obscenity, etc.)
Must have missed the bandwidth meltdown and subsequent parallel universe posting that occurred.
Count me in as one who makes it a point to read and consider your posts, Jake.
When educated and entrepreneurial young people leave their country in massive numbers, it impacts the economy for the long term. Their country invested heavily in their education…
Ummm, no. THEY invested heavily in their education and have had the good sense to realize that they are likely to get NO return on their investment if they stay in the moribund, bureaucratic, crony-kleptocracies of the EU.
Hm, yes, it is a bit harshly said but it is the point I was trying to make further up.
Why should the Greeks wait to be ‘kicked out’ … they will be leaving on their own before long. Bring back the drachma, default on the Euro debt. In a year they’ll be doing better (look at Argentina). Others are soon to follow. There are only a few countries that want to be part of the United States of Germany (hint: Spain, Portugal, Italy and even France won’t be sticking around).