South Europe

The Mediterranean subregion of South Europe (Figure 4.31) was once unrivaled in wealth and power. The Greek and Roman empires in the ancient period were followed in the medieval period by the Italian trading cities of Venice, Florence, and Genoa, with contacts stretching across the Indian Ocean and by land through Central Asia to eastern China. During the sixteenth century, Spain and Portugal developed large colonial empires, primarily in the Americas but also in Africa and Southeast Asia.

FIGURE 4.31 The South Europe subregion.

Then times changed, as the rest of Europe’s economy expanded to a global scale with the development by England, France, and the Netherlands of distant colonies. The Mediterranean ceased to be a center of trade. South Europe declined, and the Industrial Revolution reached this subregion relatively late. Even today, much of South Europe remains poor in comparison to the rest of the continent; only some of the countries of Central Europe are poorer (see Figure 4.27A).

This section pays particular attention to Spain and Italy, contrasting the parts of each country that are now prospering with the parts that have remained poor. Then Greece, an early member of the European Union, is discussed in relation to the effect of its recent financial problems on its status as an EU member.

In all six countries of South Europe—Portugal, Spain, Italy, Malta, Cyprus, and Greece—agriculture was the predominant occupation through most of the twentieth century. Farmers often lived in poverty, producing crops for local consumption. The lack of industrialization meant emigration was the only route to monetary success. In the 1970s, however, agriculture was modernized and mechanized. Since that time the focus has been on irrigating large holdings to grow commercial crops for export (see Figure 4.5C), but the abundance of agribusiness produce flowing from South Europe is not without problems. The use of pesticides and chemical fertilizers has negatively affected producers and consumers. The surpluses have driven down prices, hurting smaller family farmers across Europe. Agriculture (measured as a percentage of GDP and as a percentage of the labor force) has declined in importance in South Europe as manufacturing, tourism, and other services have increased. Middle-class tourist money has brought new life to the economy of the region, but it has done little to elevate the lives of poor, rural people. In Greece, for example, income from tourism has been confined to scenic coastal and island locations, and many interior rural areas remain poor and isolated. In much of South Europe, the very qualities that attract tourists are being threatened by the sheer number of visitors and the negative effects they have on coastal environments and on rural culture.

Spain and Portugal

In the last quarter of the twentieth century, both Spain and Portugal emerged from centuries of underdevelopment. Just 40 years ago, Spain was a poor and underdeveloped country wracked by years of civil war and then a military dictatorship led by Francisco Franco. Portugal was similarly authoritarian and was still trying to hold on to its African colonies. Even the physical location of these two countries was no longer the advantage it had been during the days of empire, as commercial activity had long ago shifted away from the Mediterranean to West Europe and the wider world (Figure 4.32). The Pyrenees kept Spain isolated from the more prosperous parts of Europe, making land travel and commerce difficult.

FIGURE 4.32 The Tower of Belem in Lisbon, Portugal. In order to protect the wealth brought by his growing empire in Asia, Africa, and the Americas, King Manuel I of Portugal constructed a system of defense around the capital of Lisbon. Built from 1513–1519, during an era of great prosperity, the Tower of Belem was both a central part of this defense and a ceremonial gateway to and from the city. For many of the Portuguese expeditions of discovery and colonization, including most of the colonization of Brazil, the tower of Belem was the last architectural symbol of home the travelers saw as they left on their long voyages. Courtesy Mauricio Abreu/AWL Images/Getty Images

In 1975, Spain made a cautious transition to democracy; in 1986, it joined the European Union under a cloud of suspicion that it would not measure up. Portugal, after a bloodless coup in 1974, underwent democratic reforms and granted independence to its overseas colonies. Since then, growth has accelerated in both countries with the help of EU funds aimed at bringing these countries into economic and social harmony with the rest of the European Union through investment in infrastructure and in human resources. As a result of these improvements, Spain especially enjoyed success. Foreign businesses invested in industry, and factories were modernized. The cities of Barcelona and Madrid became centers of population, wealth, and industry. Both are now linked to the rest of Europe by a network of roads, airports, and high-speed rail lines.

For some time, segments of Spanish and Portuguese society have not been able to participate in the new prosperity. Many small farmers remain poor, particularly in the northwestern and southwestern provinces of Spain, which have few resources, and throughout Portugal. Recently, even in the relatively prosperous zones of Barcelona, Madrid, and Lisbon, the global recession and a housing bubble similar to that in the United States resulted in many workers being laid off. In 2008, unemployment in Spain was 13.9 percent; by 2011, it was 20 percent.

Underemployed Spanish and Portuguese workers have been willing to work for significantly lower wages than those paid in North and West Europe, and these lower wage scales have helped draw foreign investment from around the world. This is especially true for Spain, where other attractions include its now-solid democratic institutions, which enable the country to withstand crises (such as the terrorist bombing in Madrid in March 2004, and the current economic recession); an educated and skilled workforce (partly the result of EU funds for training); and somewhat lenient environmental and workplace regulations. Spain’s economic base includes agribusiness, food and beverage processing, and the production of chemicals, metals, machine tools, textiles, and automobiles and auto parts. Ford, Daimler, Citroën, Opel, Renault, MDI, and Volkswagen all have factories in Spain; but because of the debt crisis in the European Union, Spanish auto production shrank by 5 percent from 2007 to 2012. Economy car sales are down across Europe.

Regional disparities in wealth within Spain and between Spain and Portugal contribute to persistent levels of social discord. Two of Spain’s most industrialized and now wealthiest regions—the Basque country in the central north (adjacent to France) and Catalonia in the east (also bordering France)—have especially strong ethnic identities. Their inhabitants often speak of secession from Spain as a response to long years of repression by the Spanish government. In addition, the Basques would like to avoid supporting Spain’s poorer districts; a Basque separatist movement periodically resorts to violence. Meanwhile, Galicia, in the far northwestern corner of Spain, also has a strong cultural identity. All three of these ethnic enclaves emphasize their distinctive languages as markers of identity and chafe against the use of Castilian Spanish as Spain’s official language.

In Portugal, though unemployment rates are lower than in Spain, concern over financial futures is higher than in any other South Europe country, and people have cut expenditures in nearly all categories except education.

In an effort to ameliorate various divisive cultural and economic disparities, the Spanish and Portuguese governments borrowed so heavily to boost development that, like Greece, their budget deficits exceeded (by three times) the Euro zone limit. As of the middle of 2012, Spain and Portugal were in danger of defaulting on loans and requiring a bailout. EU-enforced belt tightening then brought on social unrest: unemployment rose to 24 percent in Spain and 16 percent in Portugal; miners protesting in Madrid were fired upon with rubber bullets; a range of middle-class citizens joined raucous demonstrations; and across Spain, individual provinces sought emergency federal financial aid.

In Spain, migration is another important part of the country’s present situation. Spain’s connections to North Africa date back more than 1300 years; Moorish Muslim conquerors came in 700 c.e. and stayed until they were expelled in the late 1400s, deeply influencing Spanish culture, language, architecture, cuisine, and attitudes toward gender roles. Today, more than 600,000 immigrants to Spain from North Africa (many not in Spain legally) are working in cleaning and maintenance or are factory workers. They are joined by several million people from sub-Saharan Africa and from Spain’s former colonies in Middle and South America. A significant number of these are professionally trained people who despaired of making a decent living in their home countries. It is important to note, however, that the net migration rate is out of Spain. Since the 1970s, several million Spanish workers have migrated to work in other European countries, creating employment niches for those coming in. The brain drain to EU countries may actually benefit Spain because many Spaniards eventually return with new skills and ideas.

Italy

Italy has the largest economy in South Europe and a high GNI (PPP) per capita; and on the UN HDI, Italy (24) ranks just below Spain (23) (see Figure 4.27A, B). The north of Italy is industrialized and prosperous while the south is agricultural, is dependent on government payments, and has a high unemployment rate.

Over the millennia, Italian traders have contributed greatly to European culture and prosperity. During the late 1200s, Marco Polo, from a wealthy trading family in Venice, took a trip through Central Asia to China and returned after some 20 years to give medieval Europeans their first impressions of life and commerce in China. The wider view of the world that Polo brought home contributed to the European Renaissance in northern Italy. Wealthy families such as the Medicis were patrons of the arts and literature and invested in beautifying public and private spaces. Italy’s enlightened ideas about philosophy, art, and architecture spread throughout Europe. Its prominence faded, however, as first Spain and Portugal and then England, France, and the Netherlands grew rich on their colonies in the Americas, Asia, and Africa. During the 1700s and 1800s, Italy got caught up in a long series of wars between its then-richer and more powerful neighbors, France, Spain, and Austria.

Progress was rocky for Italy’s ordinary people, buffeted by the political ambitions of politicians and religious leaders (the Pope, the leader of the Catholic Church, remains headquartered at the sovereign Vatican City in Rome). Wide disparities in wealth and power left whole sections of the country lawless and in decline, especially the southern half of the peninsula and the islands of Sardinia and Sicily, which were collectively known as “the South.” There, absentee landlords and central government tax collectors from northern Italy hired mafiosi to collect fees from those who worked the land but were given no chance for self-government. Economically, the south remains woefully behind the north, due in part to the pervasive corruption that in some places has a stranglehold on civic institutions.

Northern Italy, by contrast, has one of the most vibrant economies in the world, producing products renowned for their quality and design: Ferrari automobiles, Olivetti office equipment (now a subsidiary of Telecom Italia Group), and high-quality musical instruments. In Milan, one of the largest cities in Italy, fashion designers such as Giorgio Armani have surpassed even their rivals in Paris. However, the mainstay of the Italian economy has traditionally been the exporting power of thousands of small mom-and-pop factories that make everything from machine valves to buttons, shoes, and leather clothing—all of which can now be made more cheaply in China. The small factories are closing, Italy’s share of global trade is dropping, and its budget deficits have exceeded the limits that the European Union places on its member countries (Germany and France also have large budget shortfalls but are more solvent). Like all countries in the Euro zone, Italy can no longer simply devalue its money, formerly the lira, to make its products less expensive on the world market.

For all of Italy’s stylish success as an industrial and services leader in Europe and the world, its ability to continue attracting investment has been damaged by an inefficient bureaucracy, high tax rates, dense tax rules, inadequate infrastructure, and corruption. In 2011, this situation earned Italy a global competitiveness rank of 43, below that of many countries in Asia, Southeast Asia, and Southwest Asia.

Italy has been a democracy since World War II and is a charter member of the European Union. Because of its domestic politics, though, Italy is known as the “bad boy” of Europe, a designation that is usually taken humorously. The label comes in large part from unfair stereotypes of Italians as clever operators on the fringes of legality. But it also derives from the fact that Italians vote governments in and out in rapid succession, and they frequently reelect leaders who have been mixed up in corruption. Italians have devised ways to live with official indiscretions without descending into national crises. During the dozens of governmental emergencies since 1950, a quasi-government based on informal relationships—the sottogoverno, or “undergovernment”—has taken over whenever a predicament has developed, and daily life has proceeded apparently unimpaired.

Italy, like Spain, has for a decade or more dealt with large numbers of immigrants, principally from North and sub-Saharan Africa. As globalization spreads, agricultural and industrial policies that favor development in Europe and other rich areas have had the side effect of jeopardizing farmers, fishers, and small artisans across Africa. Hundreds of thousands of young Africans, usually those with some education, have, in desperation, chosen to migrate to Europe to look for work so that they can support families back home. Many have arrived along Italy’s southern shores in leaky boats via North Africa, which has few protections for refugees. This poorest part of Italy has not welcomed the Africans, who are stigmatized as public enemies and immediately arrested or victimized by unscrupulous labor and sex worker scouts.

Greece

The Kingdom of Greece became independent from the Ottoman Empire after World War I and for a while was a republic, but in 1935 the Greek monarchy was reestablished. Greece was occupied by both Italy and Germany during World War II; and after the war, it entered a protracted era of communist/anti-communist civic unrest. Greece joined NATO in 1952, a move that seemed to strengthen ties with post-war Europe; but in the mid-1960s, a military coup established a dictatorship that lasted until 1974. Democratic elections followed, and the Greek monarchy was abolished.

In 1981, after years of instability, Greece joined the emerging European Community. When Greece signed on to the 1992 EU Treaty of Maastricht, it became obligated to limit deficit spending and debt levels. Always one of the poorer countries in Europe and one that spent more than it took in, Greece entered the Euro zone in 2001, at a time when low interest rates and the strong Euro made excessive borrowing possible. Greece borrowed for infrastructure projects and to fund state jobs and benefits. The quality of the infrastructure projects was compromised by a culture of corruption and tax evasion that put public funds in the pockets of officials and other elites. Many of the intended recipients of benefits were cheated, and the Greek deficit increased. Greece did not report these problems to the EU banks and regulators. The interest rate on Greece’s debt shot up when the debt—then €360 billion (U.S.$490 billion)—was revealed to be so large. Already short of cash, Greece found it impossible to pay even the interest charges and entered a long period of being near default. The Euro zone countries and the IMF have arranged for repeated bailouts, which by October of 2012 totaled €240 billion. In return, the EU and the IMF demanded stern austerity measures, the brunt of which are falling on the elderly and the poorest in Greece.