From Britain to Greece: Economic Woes Plague Europe’s Four Corners

April 25, 2016Europe/Middle Eastby EW News Desk Team

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Every corner of Europe is seeing renewed economic struggles that are fomenting political strife and revolutionary reforms.

In the United Kingdom, a Conservative government that once promised a referendum on EU citizenship is scrambling to convince its own populace to vote to remain in the UK. Foreign leaders, such as U.S. President Barack Obama, and economists, such as MIT’s Nobel-Prize-winner Paul Krugman, are urging Britain to vote to remain in the union, despite its flaws and weak economic growth.

British voters, however, are veering more towards leaving the union after frustrations about stagnant economic conditions, which the Vote Leave campaign asserts is a symptom of EU membership. Nonetheless, the UK government insists that tax burdens will rise and economic growth will fall if the UK leaves the union.

Those warnings fall on deaf ears, in part, due to British frustrations with skyrocketing housing costs. In London, average house prices rose to £552,000 ($795,000) in March, which is over 15 times the average annual salary in London. Most financial experts recommend homebuyers purchase a home that is no more than 3 times their annual salary.

That increase in housing costs is due to foreign investors snatching up properties in the capital, often to avoid taxes, hide capital, or launder money. That caused London house prices to rise by nearly £500 per day in January this year, far outstripping price growth elsewhere in the country.

Additionally, wages for most Britons are declining substantially. According to a new study by Oxfam, the poorest tenth of UK residents lost 20.3% income due to spending cuts, while earnings for cleaning staff fell 3.4% year-over-year in 2012 and 11.2% year-over-year for waiting staff.

Continental Struggles

Elsewhere in the EU, persistent economic struggles continue to plague the union’s peripheral states.

The Bank of Portugal lowered its country’s economic growth forecast for 2016 to just 1.5%, implying stagnant growth rates from last year. "The weakening of growth in 2018 reflects structural constraints to potential growth of the Portuguese economy, especially the high indebtedness of the private and public sectors,” the Bank of Portugal said. Those cuts have largely been at the insistence of the European Central Bank (ECB).

The ECB has also enforced austerity on Greece, whose high-profile negotiations created financial tumult in Europe throughout 2014 and 2015. After the ruling Syriza party softened its hardline stance in negotiations, however, the International Monetary Fund and European Commission said that they have made “progress” in talks about providing assistance to Greece in exchange for continual austerity measures. Meanwhile, reports of homeless pensioners and children dying from a lack of access to public healthcare have come from Greece.

In the northeastern corner of Europe, xenophobic political tailwinds have compounded tensions between Finland’s working populace and European Union leaders, which have been exacerbated by a decline in Finland’s forestry industry, one of its major sectors. The industry has lost nearly 20,000 jobs in the last decade, which has cut 0.75% off Finland’s GDP since 2007, according to the Organisation for Economic Co-operation and Development.

With this backdrop, the Ministry of Finance said Finland’s economy has returned to growth in 2015, having risen by 0.5%. The Ministry also thinks it will grow 0.9% in 2016, with further growth acceleration to be expected in the next two years.