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Europe's Middle Classes Feel The Squeeze
Misery in France, declining expectations in Germany, anger in Britain
Soaring costs and stagnant wages have persuaded a generation of middle-class Europeans that they're unlikely to share the good life their parents enjoyed.
Newspapers across the continent have reported how spending power has declined across the social scale; however, they've concentrated on middle class thirtysomethings, who are feeling the pinch in a way their upbringing never led them to believe they would.
There are numerous linked reasons for the downturn, though these can vary from nation to nation. In Britain, families who invested in their homes are feeling the credit squeeze as mortgage repayments rise; there is also fear that property prices could fall, plunging thousands of homeowners into "negative equity."
In France, economists blame the 35-hour week for keeping salaries down, while inflation in the Eurozone has soared to 3.3 percent (down from 3.6 percent last month), well above the European Central Bank's target rate of 2 percent. The ECB's only obligation is to keep inflation low; its executive has resisted calls from governments for the bank to extend its brief to drive growth too.
As inflation hits families and lack of growth hits Euro economies, pressure on the bank chiefs is likely to intensify, not least since the re-election of Silvio Berlusconi in Italy. Berlusconi, like France's President Nicolas Sarkozy, has called for the ECB to act to reduce the exchange rate of the Euro to make European exports more appealing to overseas markets; in Italy, complaints about rising prices are linked by shoppers to the introduction of the Euro.
In Germany, the International Herald Tribune finds a family on decent salaries who spend forty percent of their joint income on a mortgage; a sociologist speaks of the "existential angst" of the couple who never thought they could "belong to a group of people who slide down the social scale."
The IHT calls the phenomenon "downward mobility" - workers with degrees, in "respectable" middle class occupations like teaching, find themselves priced out of the lifestyle their parents enjoyed; but as they don't qualify as "impoverished" (like 19 percent of Europeans) they find government sympathy in short supply.
While economic figures show that prices have risen in the Eurozone by 18 percent since 1999 (and by over 20 percent in the rest of the EU), there is anecdotal evidence that in some social groups, the rise may be even higher. Energy prices have shot up by 20 percent, for example, reflecting the staggering rise in oil prices. The IHT finds a French couple on the national average income who claim to be struggling to make ends meet and find that their annual pay rises are falling well below the rate of price increases.
Spending power has overtaken unemployment as the main concern of the French, as Nicolas Sarkozy has found to his cost. His stubbornly low personal ratings may have been provoked in the first instance by his colourful personal life, but they have remained that way because the French are finding that their Euro now longer stretches as far as it did. Families are ending their tradition of daily shopping in markets and boulangeries and increasingly doing the weekly shop in discount supermarkets. And they're finding this dismaying.
The husband remarks that "In France, when you can't afford a baguette anymore, you know you're in trouble... The French Revolution started with bread riots." This is a good point - never forgetting the old rule that western civilisation is only "three meals away from savagery."
It's certain that EURSOC's US friends reading this are, by this stage, brimming with ideas for how to solve this mounting crisis; however, wherever you look, no-one profiled in the press is crying for "more liberalism" as a panacea for Europe's troubles.
The French government is introducing a law designed to free up the retail sector by liberalising price fixing laws and opening regulations, which it hopes will lead to the opening of more supermarkets. This could cut prices, drive growth and lower unemployment as the big retail sector booms, but would have an adverse effect on what many see as the essence of their cultural identity.
Farmers warn that big supermarkets would force suppliers to lower their prices even further, driving many out of business. Their fears are shared by the business association representing small and medium shop owners, which argues that thousands of "petits enterprises" could go to the wall as the hypermarkets exert their influence.
This would wipe out village and town centres across France, they argue, putting paid to for what many citizens is an essential element of the agreeable French lifestyle - little stores and markets catering to communities. They doubtless point to the British experience for confirmation of their dire warnings, though it is worth noting that specialist grocers and food shops have began to make something of a comeback in swisher UK villages in recent years.
Both farmers and shopkeepers plan street action in the next weeks to protest against the measures.
Doubtless French voters like the couple the IHT interviews would agree. But then a French paradox comes into play: The French are unanimous that the movement of manufacturing jobs from France to China is a bad thing; however, ask them if they are willing to pay ten Euros for a pair of French-made socks rather than five Euros for three pairs of Chinese socks, and they vote with their wallets. We'd all love to be shopping from the local baker and butcher, but when Carrefour can undercut them by up to fifty percent, well...
Of course, the French would add that there is no evidence that big supermarkets are likely to act responsibly once they've exterminated small shopkeepers. Prices could creep up yet again after competition is out of the way, and farmers will remain under pressure to keep their costs down.
Another feature of the downturn, first noted in the British press a couple of years ago in response to the Russian oligarchs and US hedge fund managers buying up properties in the UK, is that the middle classes are finding themselves increasingly distanced from the rich.
The German interviewee says how he thought following in his father's footsteps to become a teacher guaranteed a certain lifestyle. "Today" he says, a new class of bankers, executives and other high earners has moved in. "I feel like we've been in a slow process of losing to the people up top... I've come out of the last 10 years looking up at those people."
The German couple responded to their situation by voting for a hard left party in the last election, "out of desperation". in France, the extreme left always gets a hefty vote, but the travails of many workers have dismayed the opposition Socialist Party, whose leadership was hoping to introduce modernising reforms in this autumn's party conference.
In Italy, always delightfully contradictory, the hard left was smashed in this month's election, though commentators in the UK press at least are more concerned about the appearance of several robust right-wingers in prominent positions in government. The Independent moaned that Gianni Alemanno, who it calls a "Neo-fascist" is the new mayor of Rome, and lists other right-wingers who are likely to feature in Silvio Berlusconi's cabinet.
All interviewees profess concern at their future.
However, it's worth pointing out that their futures are slightly rosier than those of many of us. Two teachers and an employee of the French postal service - these are all civil service jobs and as such are not only guaranteed almost for life but also come with pensions which, while not likely to pay for a blissful retirement, will be much better than many in the private sector can hope for.
Public sector workers in France and Britain have taken to the streets to complain about low pay: Nicolas Sarkozy said last year that there was "no more money." In Britain, there has been plenty of money ( a recent report puts Labour's increased tax take since 1997 as "an almost unbelievable £1,229,100,000,000") but as Dan Hannan argues, "Labour's spending was like a flash flood rather than a planned irrigation. The water sluiced away uselessly: that is, it disappeared into pay packets without raising productivity."
Now, like with Labour governments before it, the current administration is discovering that the money has run out.
European bread riots seem a very distant possibility, but if financial hardship is making the middle classes restless, then who knows what could be going through the minds of the near 20 percent of Europeans the EU classes as living beneath the poverty line. Combined with multiple other factors, which we will be addressing in the coming weeks, Europe could be in for a bumpy ride.
